CIT Vs ERNST & Young U.S. LLP (Delhi High Court)
The Delhi High Court decided a batch of Revenue appeals under Section 260A of the Income-tax Act, 1961 relating to Assessment Years 2018-19 to 2022-23 involving Ernst & Young U.S. LLP. The appeals concerned (i) whether amounts received on account of secondment of employees to EY India entities constituted Fees for Technical Services (FTS) under Section 9(1)(vii) of the Income-tax Act and Article 12 of the India–USA DTAA, and (ii) whether receipts for services rendered in and from the USA qualified for exemption under Article 12(5)(e) read with Article 15 of the DTAA. The Court noted the assessment history, including draft assessment orders, DRP directions, ITAT orders, the amounts added for secondment reimbursements and professional services across the relevant assessment years, and the questions of law framed in each appeal.
The Revenue contended that the seconded personnel continued to remain employees of EY US, that the deputation arrangement resulted in technical knowledge, experience and skills being made available to the Indian entities, and that the reimbursements were taxable as FTS under Article 12 of the DTAA. It further argued that services rendered from the USA did not qualify for exemption under Article 12(5)(e), challenged the ITAT’s application of the “make available” test and its interpretation of “professional services”, and relied on the findings of the Assessing Officer and the Dispute Resolution Panel, the deputation arrangements, and judicial precedents including Centrica India Offshore (P) Limited.
