Direct Tax Amicus, July 2026

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Article

Cross-border secondments and the quest for the true employer

By Prachi Bhardwaj, Loveena Manaktala and Siddharth Chowdhry

Secondment arrangement is the most debated topic from taxation standpoint. The article in this issue of Direct Tax Amicus discusses the continuing tax controversy surrounding cross-border secondment arrangements, particularly the determination of the ‘true employer’ and whether salary reimbursements constitute taxable technical services. It traces the evolution of Indian jurisprudence from Centrica to subsequent taxpayer-favourable decisions, before analysing the Delhi High Court’s recent decision in EY US LLP. The Court has held that EY US remained the employer due to continuing employment links and that transfer of group processes and know-how satisfied the ‘make available’ test. According to the authors, though, India-USA tax treaty provides a specific exclusion for fee for included services from the ambit of Service PE, the treaties that do not contain similar protections would pose significant Service PE risks.

Notifications and Circulars

·         Exemption on interest from Government securities to Foreign Institutional Investor and Bank for International Settlements

·         Approval of the University of Hyderabad and Public Health Foundation of India, Delhi for Scientific Research for the purposes of Section 45(3)(a)(i)

·         Transition provisions under Section 536 of the Income-tax Act, 2025 – FAQs issued

Ratio Decidendi

·         Section 271(1)(c) penalty cannot survive after assessment abates for failure to pass timely Order Giving Effect – Bombay High Court

·         Broken period interest received on sale of NCDs retains character of interest; not taxable as capital gains – Delhi ITAT

·         Taxability of fiscally transparent partnership to be examined partner-wise under relevant DTAAs – Delhi ITAT

·         Holding company cannot substitute resulting company for compliance with demerger conditions – Mumbai ITAT

·         Interest on Nostro accounts and placements with head office/overseas branches not taxable; interest from overseas banks also outside scope of Section 9(1)(v)(c) – Mumbai ITAT