Amount paid to seconded personnel not liable for deduction of tax at source

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HIGH COURT OF BOMBAY

Commissioner of Income-tax

v.

Petroleum India International

IT APPEAL NO. 3653 OF 2009

JANUARY 10, 2013

 

The trained man-power deployed abroad is drawn for the employees of its member companies. However, such deployed man-power continue to be the employees of its member companies but are seconded to the projects abroad by the respondent-assessee company. In the assessment year under consideration, the assessee had claimed an amount of Rs. 3.93 crores as expenditure being the overseas compensation paid to the employees of the oil companies seconded abroad under the head ‘seconded personnel expenses’. The assessing officer by his order dated 29th March 2000 disallowed the amount of Rs. 3.93 crores paid to seconded employees on account of its failure to deduct tax at source under Section 192 of the Income Tax Act, 1961 (‘the Act’). Therefore, the payment was hit by Section 40(a)(iii) of the Act.

Seconded personal continue to be the employees on the roll of the member oil companies even during the period of secondment. These seconded employees continue to receive their salaries and emoluments from the member oil company of which they are employees. Therefore, not being employees of the respondent-assessee, the overseas allowances cannot be subject to deduction of tax at source.

Consequently, in view of the finding of fact arrived at that the seconded personnel are not the employees of the respondent-assessee, the amount paid as foreign allowances to the seconded personal is not liable for deduction of tax. In view thereof, the occasion to apply Section 40(a)(iii) of the Act does not arise.