EY has approached the Supreme Court in a significant tax dispute involving employees deputed from the United States to India, challenging a Delhi High Court ruling that treated reimbursements made by Indian entities to EY US as taxable fees for technical services rather than simple salary cost recoveries.
According to reporting by Mint, EY filed its appeal before the Supreme Court on 15 September, seeking relief from a June 2026 High Court judgment that overturned an earlier ruling in its favour by the Income Tax Appellate Tribunal (ITAT). The matter has not yet been assigned to a bench for hearing.
The case covers assessment years 2018-19 to 2022-23 and centres on a key question for multinational employers: whether payments made under employee secondment arrangements should be treated as reimbursement of personnel costs or taxable payments for technical services.
A dispute with wider implications
The outcome could extend beyond EY and affect multinational corporations operating in India, including consulting firms, technology companies and global capability centres that routinely move employees across international offices.
The dispute stems from an arrangement that began in October 2017, under which EY US deputed employees to its Indian entities. While these employees worked in India, they remained on EY US payrolls, retained certain US employment benefits and were expected to return to the US entity after completing their assignments.
Indian EY entities reimbursed EY US for employee-related costs. However, the tax department maintained that the payments went beyond salary reimbursements because the employees were transferring technical knowledge, expertise and skills to Indian operations.
According to the tax department's position, the payments therefore qualified as fees for technical services, making them taxable in India.
How the case progressed
The dispute moved through multiple tax forums before reaching the Supreme Court.
Key developments include:
- An assessing officer added approximately ₹50.99 crore to EY US's taxable income for assessment year 2019-20 through an order issued on 27 July 2022
- Similar disputes arose for subsequent assessment years
- EY US challenged the assessments before the Income Tax Appellate Tribunal (ITAT)
- On 20 June 2023, the ITAT ruled in favour of EY US
- The tribunal held that the payments were cost-to-cost reimbursements and did not constitute fees for technical services under the India-US tax treaty
- The tax department subsequently appealed before the Delhi High Court
EY US maintained before the tribunal that there was no separate consideration for technical services and that the payments merely covered employee-related expenses incurred while personnel worked in India.
Delhi High Court takes a different view
The legal position shifted in June 2026 when a division bench of the Delhi High Court reversed the tribunal's findings.
The court concluded that EY US continued to exercise substantial control over the seconded employees because they remained on its rolls during their assignments in India.
According to the judgment, the employees were providing technical knowledge and expertise to Indian entities. On that basis, the court held that the payments received by EY US were taxable as fees for technical services.
The High Court also reviewed payments received by EY US from Indian clients for services delivered from the United States. It found that the ITAT had not fully examined aspects of those transactions and directed certain issues back to the tribunal for fresh consideration.
Why companies are watching closely
The case is being closely monitored because employee secondment arrangements are widely used across multinational organisations operating in India.
A 6 July 2026 analysis by law firm Trilegal, cited by Mint, noted that the High Court ruling could increase scrutiny of secondment structures. The analysis stated that merely labelling payments as salary reimbursements may not be sufficient where overseas entities retain employment relationships and employees transfer specialised knowledge to Indian operations.
The firm also observed that the judgment could have implications for withholding tax and GST treatment in similar arrangements.