Delhi High Court Rules EY US Secondment Payments Taxable in India
The court held that EY US retained key elements of the employment relationship and that secondees transferred technical knowledge to Indian member firms, making the payments taxable under the India–US
The Delhi High Court has ruled that payments made by Indian EY member firms in connection with employees seconded from EY US were taxable in India as fees for technical services.
The judgment, issued on 18 June 2026, overturned decisions by the Income Tax Appellate Tribunal that had treated the payments as non-taxable reimbursements of salary and related employment costs. The case concerned a series of tax years and several EY entities operating in India.
The secondees were originally employees of EY US. They moved to India for fixed periods and worked within EY’s Indian businesses, on projects managed by the relevant Indian entity.
EY US continued to pay their salaries and administer benefits such as US pension and social-security contributions. The Indian entity then repaid EY US for those costs. EY US charged only the exact amount it had paid, without adding a profit margin or service fee. The Indian entity also paid the secondees’ local costs, including accommodation, travel and other expenses connected with their work in India.
In practical terms, the employees worked in India, were supervised by the Indian entity and contributed to its projects. The Indian entity received the benefit of that work and bore its economic cost. EY’s position was therefore that EY US was not selling a service to India. It was simply paying some employment costs centrally and being repaid by the Indian entity.
The tax authorities disagreed. They argued that the employees remained closely tied to EY US because their US employment, pension and social-security arrangements continued, and they normally returned to EY US when the assignment ended. The Delhi High Court accepted that view and held that EY US was effectively providing skilled personnel and technical knowledge to the Indian entities. The reimbursements were therefore treated as payments for taxable services rather than merely the repayment of salaries.
The High Court found that EY US controlled the secondees’ employment. The Indian entities could end an assignment, but they could not terminate the individual’s underlying employment with EY US, and the employees ordinarily returned to EY US after completing their secondments.
The court found that the secondees had been deployed to implement EY group policies, processes and quality standards and to provide training within the Indian firms. It held that this involved the transfer of technical knowledge, experience and skills that the Indian entities could subsequently apply themselves. The secondment payments were therefore taxable as fees for technical or included services.
The ruling could affect multinational businesses, global capability centres and professional-services firms that use foreign employees in India while continuing to describe payments to the overseas employer as salary-cost reimbursements. Its practical effect will depend on the contractual terms, the degree of control retained by the home entity and whether the secondees transfer knowledge that remains usable after their assignments end.
Related Coverage
Delhi High Court: Commissioner of Income Tax v Ernst & Young U.S. LLP
The judgment sets out the contractual arrangements, treaty analysis and reasons for overturning the tribunal on the secondment issue.
Alvarez & Marsal: Delhi High Court rules salary-cost reimbursements taxable as FTS
Explains the significance of EY US retaining a lien over secondees and distinguishes the secondment payments from the separate service receipts remitted to the tribunal.
LiveLaw: EY US secondment payments satisfy the “make available” test
Provides a detailed legal summary of the court’s findings on employment control, training and the transfer of technical knowledge.
LKS Attorneys: Cross-border secondments and the identity of the true employer
Analyses why contractual labels and the absence of a markup were insufficient to establish a non-taxable reimbursement.
The Economic Times: EY ruling creates new tax risk for multinational secondments
Examines the potential cost and compliance implications for multinational companies, global capability centres and Big Four firms operating in India.
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