January 2019

Section 9 of the Act; Article 12 of India-Japan DTAA – payments received by Japanese company in respect of deputation of high-level technical executives to Indian subsidiary were FTS, particularly because technical knowledge was made available; in absence of reconciliation of receipts with actual payments, the receipts could not be treated as reimbursement of cost.

Geeta Jani / Dhishat B. Mehta
Chartered Accountants

16.  [2018] 99 taxmann.com 183 (Chennai - Trib.) Panasonic Corporation vs. DCIT ITA No.: 1483 (Chny) of 2017 A.Y. 2013-14 Date of Order: 2nd August, 2018

 

Section 9 of the Act; Article 12 of India-Japan DTAA – payments received by Japanese company in respect of deputation of high-level technical executives to Indian subsidiary were FTS, particularly because technical knowledge was made available; in absence of reconciliation of receipts with actual payments, the receipts could not be treated as reimbursement of cost.

 

FACTS


The Taxpayer was a company incorporated in Japan. (“FCo”). FCo was engaged in the business of electrical and electronic products and systems. FCo had a subsidiary in India (“ICo”). In the course of its business, FCo deputed certain high-level technical executives to ICo for providing highly technical services to ICo. ICo reimbursed the salaries of the deputed employees to FCo.

 

According to ICo, since it was a case of mere reimbursement of expenses, the receipts by FCo could not be construed as income of FCo. Further, the objective of secondment was to support ICo and there was no economic benefit to FCo.

 

According to the

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