High Court Upholds Tax Authority Stance on Seconded Corporate Staff
In a landmark corporate taxation judgment, the Delhi High Court ruled in favor of the tax authority in the Ernst & Young U.S. LLP (EY US) secondment case. The court held that payments made by Indian companies to foreign entities as reimbursement for seconded employees are subject to taxation as Fees for Technical Services (FTS) under the India-US Double Taxation Avoidance Agreement (DTAA).
The ‘Make Available’ Test and Corporate Impact
The bench concluded that seconded employees effectively transfer specialized technical knowledge, experience, and processes to the local Indian company’s staff, satisfying the “make available” clause. This ruling is expected to raise the cost of international technical consultations and inter-company talent transfers for multinational businesses operating in India.
