Honda R & D Company Ltd. v. ACIT(IT): Cost-to-cost reimbursement of salary paid to seconded employees did not constitute fees for technical services under India-Japan DTAA.

14. [2026] 186 taxmann.com 1061 (Delhi - Trib.)

Honda R & D Company Ltd vs. ACIT(IT)

A.Y.: 2018-19 & 2022-23 Dated: 27 May 2026

Article 13 of India-Japan DTAA – Cost-to-cost reimbursement of salary paid to seconded employees did not constitute fees for technical services, and hence, could not be taxed in India.

FACTS

The Assessee was a tax resident of Japan. It was engaged in conducting research and development of Honda products. The Assessee seconded certain employees to its group companies in India. Under the terms of the secondment, the Assessee paid part of the salary payable to seconded employees in their home country and Indian entities reimbursed it on cost-to-cost basis.

The AO contended that salary reimbursement was in nature of fees for technical services (‘FTS’) under the Act and the India-Japan DTAA. The DRP upheld the draft assessment order.

Aggrieved by the final order, the Assessee preferred an appeal before ITAT.

HELD

From perusal of the secondment agreement, the ITAT observed the follo