PE case law

Indian court concludes that employees seconded to India do not constitute a permanent establishment

On 15 January 2025, the Delhi High Court ruled that the secondment of employees by a South Korean entity to its Indian subsidiary does not create a fixed place of business or a Service PE in India under the India-South Korea tax treaty. The Indian tax authorities had argued that the presence of these seconded employees resulted in a fixed place of business. However, the High Court rejected these claims, concluding that the South Korean entity did not have a taxable presence in India.

While ruling the matter in favor of the taxpayer, the High Court emphasized that the Indian subsidiary was an independent legal entity conducting its own business. Although the seconded employees were present in India, their roles were limited to facilitating the activities of the subsidiary rather than managing the South Korean entity's global operations. The High Court noted that the mere presence of seconded employees at the Indian entity's premises does not, by itself, establish a fixed place of business for the foreign enterprise.

Finally, the High Court addressed the Service PE argument, in which the tax authorities asserted that the seconded employees were performing services on behalf of the South Korean entity in India. The High Court held that the employees were not rendering services, consultative or otherwise, to the Indian entity on behalf of the South Korean entity; rather, these employees were seconded and were at the disposal of the Indian entity. As a result, the High Court ruled that the South Korean entity does not have a Service PE in India.