Rajendra Nayak Ganesh Pai The supreme court in the case of Eli Lilly (2009-TIOL-45-SC-IT), recently examined certain issues relating to applicability of withholding tax provisions under the Indian tax law (ITL) to overseas salary payments. Eli Lilly, Netherlands seconded expatriate employees to be employed with Eli Lilly India, its joint venture in India. These employees received home salary outside India in foreign currency. Taxes were withheld by Eli Lilly India on the India component of the salary paid by Eli Lilly India. However, no taxes were withheld on the salary paid by Eli Lilly Netherlands in the home country. The salary recipients (the expatriates) discharged the India tax obligation in respect of home country receipts by way of advance tax/self assessment tax. Total remuneration received by the expatriates was on account of services rendered in India. The main issue before the supreme court was whether withholding tax provisions of the ITL are applicable to payments in the nature of salary which are paid outside India by a foreign company to expatriates who are rendering services in India.
April 30 2009