The Supreme Court has issued notice to the Income Tax Department in EY US LLP's appeal against the Delhi High Court's ruling on the taxability of secondment costs as Fees for Technical Services.
SC Issues Notice in EY US LLP’s Rs. 368 Crore FTS Tax Dispute
The Supreme Court has issued notice to the Income Tax Department in EY US LLP’s appeal challenging the Delhi High Court's decision on the taxability of costs related to the secondment of employees to Indian entities. The case involves a disputed tax demand of Rs. 368 crore, primarily centring on whether such secondment costs constitute 'Fees for Technical Services' (FTS) under the Income Tax Act, 1961, and are thus subject to withholding tax.
The Delhi High Court had previously ruled in favour of the taxpayer, holding that the mere secondment of employees, without demonstrable transfer of technical expertise or contractual service delivery, does not amount to FTS under Section 9(1)(vii) of the Act. The Revenue argued that the seconded personnel provided managerial and advisory services integral to business operations, thereby triggering FTS implications and tax obligations in India.
"The character and nature of services rendered must be examined to determine if they qualify as technical or managerial services under the relevant treaty and domestic law,"
The Supreme Court’s issuance of notice indicates its willingness to examine the substantial questions of law relating to the nexus between employee secondment and FTS, particularly in cross-border arrangements involving multinational professional services firms. The outcome may clarify the tax treatment of global staffing models and have far-reaching implications for international firms operating in India.
Practitioners should note that the decision could refine the jurisprudence on permanent establishment risks and the delineation between administrative support and taxable technical services. The case is listed for detailed hearing in the upcoming term.
Citations
- EY US LLP v. Income Tax Department (2026)
