EY Moves SC Over Tax Treatment of Employee Secondments

EY has approached the Supreme Court against a June 18, 2026 Delhi High Court ruling that held certain payments made by EY India entities to EY US for employees deputed to India were taxable as Fees for Technical Services (FTS).

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The case could have implications for multinational companies using cross-border employee secondment arrangements.

EY filed its appeal before the Supreme Court on September 15, 2026. Moneycontrol has also reported the filing, stating that the Supreme Court website showed the matter awaiting assignment to a bench.

What is the Case About?

The case concerns employees deputed by Ernst & Young U.S. LLP to EY entities in India. The employees continued to have an employment relationship with EY US while working with the Indian entities under the secondment arrangement.

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EY US argued that the payments received from the Indian entities were cost-to-cost reimbursements of employee-related expenses, and should not be treated as consideration for technical services.

The tax authorities took a different view, arguing that the seconded employees provided technical knowledge, expertise and skills to the Indian entities.

Key point: The central issue is whether employee-cost reimbursements under a cross-border secondment arrangement can be treated as Fees for Technical Services (FTS) for tax purposes.

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What Did the Delhi High Court Rule?

The Income Tax Appellate Tribunal (ITAT) had earlier accepted EY US’s position and held that the reimbursements could not be treated as FTS under the India-US tax treaty.

The Delhi High Court reversed the ITAT’s decision in its June 18 ruling. The court noted that EY US continued to retain a lien over the employees and that the Indian entities did not have the right to terminate their employment.

The court also held that the employees were imparting technical knowledge and expertise to the Indian entities. On this basis, the reimbursement payments were treated as FTS under Indian tax law and the India-US tax treaty.

Delhi HC finding: The court considered the continuing employment relationship and control retained by the overseas entity while examining the nature of the payments.

Why It Matters to Companies

The case is relevant to multinational companies that move employees across countries as part of global workforce arrangements, including companies operating Global Capability Centres and other international business operations.

Companies may need to review how secondment agreements are structured, how employment rights are documented and how cross-border employee costs are reimbursed.

For HR and global mobility teams: The case highlights the importance of clearly documenting the employment relationship, employee responsibilities, reporting arrangements and financial terms in international secondment agreements.

The Supreme Court appeal will now determine whether the Delhi High Court’s interpretation stands. According to the reports, the matter is awaiting assignment to a bench.

Until the Supreme Court decides the issue, the tax treatment of cross-border secondment payments remains an important consideration for companies managing international employee movements.