No obligation to detuct tax at source for seconded staff

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The Authority for Advance Rulings (Income Tax) New Delhi (AAR) ruled on the obligation of an Indian company to deduct tax at source for payments made to a Korean company under a secondment agreement in Cholamandalam General Insurance Co Ltd v CIT, on 29 January.

The applicant, Cholamandalam, sought an advanced ruling on whether it was obliged to deduct tax at source for payments made to Hyundai Marine & Fire Insurance Korea (HMFICL) in connection with a secondment agreement the two parties had entered into. Cholamandalam is engaged in the business of non-life insurance and was interested in building business relationships with Indian companies which were subsidiaries or joint ventures of foreign companies.

Within the company’s organization were two divisions dealing respectively with the Korean and Japanese market segments in India. In relation to these divisions, Cholamandalam required individuals from the respective jurisdictions abroad who possessed knowledge of insurance business practices, the Korean language and other related information that would be useful to the company in the expansion of its business activities.

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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in, lbhasin@vsnl.com or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.

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