Article 5 of India-Japan DTAA – Seconded employee who worked under the supervision and control of the Indian entity could not constitute fixed place permanent establishment of the Foreign Company

16. [2025] 177 taxmann.com 434 (Delhi - Trib.)

Mitsui Mining and Smelting Company Ltd. vs. ACIT (IT)

IT APPEAL NO.1407 (DELHI) OF 2025

A.Y.: 2022-23 Dated: 31 July 2025

Article 5 of India-Japan DTAA – Seconded employee who worked under the supervision and control of the Indian entity could not constitute fixed place permanent establishment of the Foreign Company

FACTS

The Assessee, a tax resident of Japan, was engaged in manufacturing of engineered and electronic materials. It had a subsidiary in India (“I Co”). I Co was engaged in manufacturing of converters used in automobiles. During the relevant AY, the Assessee filed its return and offered certain receipts as royalty and fees for technical services and claimed reimbursements were not taxable. The AO noted that I Co had reimbursed the Assessee towards salary of an employee who was seconded by the Assessee to I Co.

Based on the secondment agreement, the AO observed that employees exercised control over I Co's premises and they carried out operations of the Assessee, which constituted Permanent Establishment (“PE”) for the Asses