TDS not applicable on relocation expenses paid with salary

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

22. Facts on record show that the Assessing Officer and DRP observed that the assessee had made payments in respect of certain amounts, such as, technology service, fee charge out, receipt of services, professional charges and relocation expenses. The Assessing Officer/DRP were of the view that such payments required TDS in terms of section 195 of the Act. Details of such payments relate to relocation charges of Rs. 1,86,68,714/- which were treated as FTS/royalty as per the India USA DTAA.

The Assessing Officer/DRP were of the strong belief that reimbursement of relocation expenses for seconded employees is a part and parcel of same secondment agreement and terms and salary and service agreements are in the nature of FTS and are charged to tax, both u/s 9(1)(vii) and under Article 12(4) of India USA DTAA, thus liable to TDS which has not been done by the assessee. Accordingly, addition of Rs. 1,86,68,714/- was made.

23. Before us, the ld. counsel for the assessee vehemently stated that reliance on the decision in the case of Centrica India Offshore Pvt Ltd 364 ITR 336 is not applicable on the facts of the case. It is the say of the ld. counsel for the assessee that substantial portion of this remuneration is towards expenses incurred by the employees travelling abroad to which principles in the case Centrica do not apply. The ld. counsel for the assessee further pointed out that on identical set of facts, the first appellate authority in Assessment Year 2012-13 has allowed the appeal of the assessee.

24. We have given thoughtful consideration to the orders of the authorities below. It is true that most of the relocation expenses are in respect of salary paid to employees of the assessee who travelled abroad for business of the appellant. However, in our considered opinion, these details need verification. We, accordingly, restore this issue to the file of the Assessing Officer. The Assessing Officer is directed to very details and examine whether the payments have been made by the assessee to its own employees who travelled abroad and decide the issue afresh after giving reasonable opportunity of being heard to the assessee.

25. In so far as the issue relating to grant of TDS is concerned, we direct the Assessing Officer to give credit of TDS as per provisions of law.