The Supreme Court has issued notice to the Revenue in EY US LLP’s appeal challenging the Delhi High Court’s ruling on the taxability of seconded employee costs as fees for technical services. The case may clarify FTS scope under the India-US tax treaty.
SC Issues Notice in EY US $368 Crore FTS Case
The Supreme Court has issued notice to the Income Tax Department in an appeal filed by EY US LLP challenging the Delhi High Court’s decision on the taxability of costs incurred in seconding employees to its Indian entities. The ₹368 crore dispute centres on whether such costs constitute 'fees for technical services' (FTS) under Article 12A of the India-US Double Taxation Avoidance Agreement (DTAA).
EY contended that the secondment of personnel was internal cost allocation within a multinational group and did not result in a taxable payment stream. The Delhi HC had ruled in favour of the assessee, holding that mere reimbursement or allocation of employee costs without an independent service contract does not amount to FTS. The Department appealed, asserting broad interpretation of technical services.
The Supreme Court’s decision may clarify the applicability of FTS provisions to intra-group staffing practices. Given the high revenue stake and conflicting rulings across jurisdictions, this case could significantly impact transfer pricing and treaty interpretation for global firms operating in India.
