ITAT Delhi: Secondment of Employees Does Not Create Fixed Place PE under India–Japan DTAA
Mitsui Mining and Smelting Company Ltd. v. ACIT, International Taxation
Citation: [2025] 177 taxmann 434 (Delhi – Trib.) (ITAT Delhi, 31 July 2025)
Core issue:
Whether secondment of Japanese employees to the Indian subsidiary (Mitsui Kinzoku Components India Pvt. Ltd.) created a Permanent Establishment (PE) of the Japanese parent in India under Article 5 of the India–Japan DTAA.
Facts:
Seconded employees were treated as employees of the Indian subsidiary (MKCI) and worked under its control and supervision.
Salary was borne by MKCI (with reimbursement arrangements) and taxed in India in employees’ hands.
The Japanese parent company (MMS) had no control over:
seconded employees (who were fully integrated into MKCI),
premises or assets of MKCI,
business operations in India.
Agreement clauses explicitly stated:
Employees act in their personal capacity, not for MMS.
MMS had no liability for their actions.
MMS had no rights over MKCI’s assets, premises, or staff.
ITAT Delhi held as below:
For a Fixed Place PE, two conditions must be met:
A fixed place of business must exist in India.
The foreign enterprise must carry on its business through that place.
These conditions were not met. Hence, no PE arose from secondment of employees.
There cannot be a fixed place PE in India merely by seconding employees. The appeal of the assessee (Japanese company) was allowed.
The copy of the order is as under:
