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SC to decide on expats' tax liability
November, 03rd 2007
The Supreme Court will decide whether domestic companies must deduct tax at source (TDS) on expatriate staff salaries, and if tax can be levied on these employees on wages given abroad by foreign joint venture partners of the Indian firms.

These issues have come up before the apex court in petitions filed by the income-tax department challenging a Delhi High Court order which held that Eli Lilly & Company (India) was not liable to pay tax on salaries paid to its expatriate employees by its foreign partner outside India. Eli Lilly India is a joint venture between domestic drug maker Ranbaxy Laboratories & Netherlands-based Eli Lilly.

A bench headed by Justice H K Sema has admitted the petitions challenging the High Courts decision to upheld the Income Tax Appellate Tribunals order. The Tribunal had ruled that Eli Lilly India need not pay tax on salaries given to its expatriates by a different entity outside India.

It had further held that under Section 191 of Income Tax Act, the expatriates were liable to pay tax directly where tax at source (TDS) had not been deducted.

The income tax authorities had sought levy of around Rs 4.96 crore on the ground that the joint venture had failed to deduct TDS on salaries paid abroad to its four expatriate employees who have been on its roll since its inception.
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