The Lien That Binds: Reimbursement Of Salaries To Secondees Treated As Fee For Technical Services

In a marked departure from what was understood to be a settled position of law qua the independence of expatriate secondees, the Delhi High Court (‘High Court’) recently ruled that secondees remain under the overarching control of the seconding entity and that such employees retain a lien over their past employment. In the case of Ernst and Young U.S. LLP¹ (‘EY US’), while setting aside the Order of the Income Tax Appellate Tribunal, Delhi (‘Tribunal’), the High Court held that cost-to-cost reimbursement on account of secondment of employees by the U.S. entity to the Indian entities qualified as Fee for Technical Services (‘FIS’/ ‘FTS’) under section 9(1)(vii) of the Income-tax Act, 1961 (‘IT Act’) as well as under Article 12 of the India-US Double Taxation Avoidance Agreement (‘India-US DTAA’).