Reimbursements Received Towards Salaries Paid to Seconded Employees Cannot be Treated as FTS: ITAT
The Income Tax Appellate Tribunal (ITAT) Delhi has ruled that reimbursements received for salaries paid to seconded employees in India should not be treated as “Fees for Technical Services” (FTS).
The assessee, Toshiba Energy System & Solutions Corporation, had received reimbursements of Rs 10,61,81,658 for the salary paid to the employees of Indian companies. The reimbursements were cost-to-cost and did not have any element of profit. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) treated the reimbursement of costs towards seconded employees as Fee for Technical Services (FTS) under Section 9(1)(vii) of the Income Tax Act and Article 12(4) of the India-Japan DTAA. The assessee company challenged this decision before the Income Tax Appellate Tribunal (ITAT), Delhi.
The Tribunal noted that the facts of this case were similar to an earlier case involving the assessee’s group company, Toshiba Corporation, where identical reimbursements were not considered as fees for technical services under the Income Tax Act and the India-Japan DTAA. Since the facts of this case were similar to the present case, the ITAT upheld that the reimbursements received for the salaries paid to seconded employees cannot be considered as FTS.
Case Citation: Toshiba Energy System & Solutions Corporation Vs DCIT (ITAT Delhi); ITA No.2113/DEL/2023; 10/12/2025; 2020-21
