### Secondment Reimbursements and Technical Services Transferred via Training Constitute Taxable Fees for Included Services

The Respondent, Ernst & Young U.S. LLP (EY US), a US-based entity, entered into deputation agreements with its Indian affiliates (EY India entities) to second employees for 2-3 years

Under these agreements, EY US paid salaries and social security in the US for administrative convenience, which were then reimbursed by EY India on a cost-to-cost basis

Additionally, EY US received receipts for professional services rendered to Indian clients from the USA

The Assessing Officer (AO) and Dispute Resolution Panel (DRP) treated the secondment reimbursements as "Fees for Technical Services" (FTS) under Article 12 of the India-USA DTAA, arguing that EY US maintained a lien on employment and "made available" technical knowledge

The AO also taxed a portion of professional receipts as FTS, denying full exemption under Article 15

The ITAT reversed these findings, holding that reimbursements were not income and the "make available" test was not met

1. Whether payments received by the assessee for secondment of employees constitute "Fees for Technical Services" (FTS) under Section 9(1)(vii) of the Act and Article 12 of the India-USA DTAA

2. Whether the "make available" clause in Article 12(4)(b) of the India-USA DTAA was satisfied regarding the services rendered

3. Whether the ITAT was justified in holding that the assessee's professional receipts fell within the exemption of Article 12(5)(e) read with Article 15 of the DTAA

The court applied Article 12(4)(b) of the India-USA DTAA, which defines "fees for included services" as payments for technical/consultancy services that "make available" technical knowledge or skill

It relied on the "make available" test established in CIT v. De Beers India Minerals Pvt Ltd, requiring the recipient to be able to apply the technology independently in the future

Crucially, it applied the precedent from Centrica India Offshore (P) Limited v. CIT, which held that secondment constitutes FTS where the foreign entity retains a lien on employment, pays social security, and provides "soft intellectual property" through its personnel, regardless of whether a markup is charged

The court also examined Article 15 regarding "independent personal services" and its interaction with the FTS exclusion in Article 12(5)(e)

The court found the ITAT’s reasoning perverse for failing to consider the binding precedent of Centrica India

The court noted that EY US maintained a lien on the seconded employees, who returned to EY US after their tenure; EY India could not terminate their primary employment, only the secondment

Per Centrica, the absence of a profit markup does not negate the nature of the transaction as a service provision

Regarding the "make available" test, the court observed that the scope of work included training, implementation of group policies, and quality standards, which transferred technical skills to EY India for future use

On the issue of professional receipts, the court criticized the ITAT for granting a blanket exemption without analyzing the specific nature of services that the AO had identified as technical/consultancy rather than strictly professional under Article 15(2)

It answered Question A and B (in ITA 423/2025) in favor of the Revenue, holding that secondment reimbursements satisfy the "make available" test and constitute taxable FTS

For the issues related to professional receipts (Question B in other appeals and C in ITA 715/2025), the court remanded the matter back to the ITAT for a fresh, reasoned reconsideration of the specific service categories and their eligibility for exemption under Article 12(5)(e)