Hiring expatriate employees under a contract of employment does not amount to ‘Manpower recruitment or supply services’

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Dear Professional Colleague,

We are sharing with you an important judgment of Hon’ble High Court, Allahabad, in the case of Commissioner of Central Excise Vs. Computer Sciences Corporation India (P.) Ltd. [2014] 52 taxmann.com 256 (Allahabad)] on following issue:


Whether the hiring of expatriate employees of Foreign Group Companies under a contract of employment on payment of salaries and related provident fund contributions amount to ‘Manpower recruitment or supply services’?

Facts & background:

Sciences Corporation India (P.) Ltd. (“the Assessee”) is a part of a Group of Companies situated in US, UK and Singapore among other countries. The Assessee in the course of its business operations hired certain expatriate employees overseas. These employees were either directly employed by the Assessee or were transferred from other Group Companies to the Assessee in India. A letter of employment was entered into between the expatriate employee and the Assessee from the date when the employee was transferred to India for the duration of the employment in the country.

The Assessee incurred expenditure on social security benefits of the expatriate employees in India including by way of provident fund. Tax was deducted from the salaries payable to the expatriate employees on the basis of the total income earned, on behalf of the employees and the assessee issued relevant Forms to the employees, in its status as an employer. The Assessee also remitted to its Group Companies certain social security and other benefits that were payable to the accounts of the expatriate employees under the laws of the foreign jurisdiction and had booked expenses during Financial years 2006-07 to 2010-11.

The Adjudicating Authority confirmed the demand of Service tax along with interest and penalties under ‘Manpower recruitment or supply agency services’ taxable under Section 65(105)(k) of the Finance Act, 1994 (“the Finance Act”). On appeal being filed, the Hon’ble Tribunal allowed the appeal filed by the Assessee. Being aggrieved, the Revenue filed an appeal before the Hon’ble High Court of Allahabad.


The Hon’ble High Court of Allahabad after observing that the Assessee obtained from its Group companies directly or by transfer of the employees, the services of expatriate employees for which the Assessee paid the salaries of the employees in India, deducted tax and contributed to statutory social security benefits, held that there was no basis whatsoever to hold that in such a transaction, a taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or supply agency. Hence, the matter was decided in favour of the Assessee.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards,

Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Flat No. 34B, Ground Floor, Pocket – 1,
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Delhi – 110091, India
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Email: bimaljain@hotmail.com
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