Secondment can create a permanent establishment, while profit attribution must rest on verified relocation costs and profitability data.

Continued foreign employment links and service deployment in India under a secondment arrangement can constitute a fixed place and service permanent establishment where the substance of the relationship shows employees rendering services in India for the associated enterprise. That finding was upheld against the assessee. Profit attribution, however, required fresh verification of the relocation expense base and global profitability material, so those computation issues were restored for reconsideration by the Assessing Officer. The rectification dispute and the grounds relating to penalty and interest were treated as infructuous, premature, or consequential and were not separately adjudicated.

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Issues: (i) Whether the assessee constituted a fixed place permanent establishment and a service permanent establishment in India on account of the seconded employees; (ii) whether the relocation expenses and global profitability data required verification for attribution of profits to the alleged permanent establishment; (iii) whether the rejection of the rectification request and the grounds relating to penalty and interest survived for adjudication.

Issue (i): Whether the assessee constituted a fixed place permanent establishment and a service permanent establishment in India on account of the seconded employees.

Analysis: The seconded personnel remained on the assessee's payroll-linked arrangements, continued to receive salary and social security-related benefits in the foreign country, and worked in India only for a limited period. The absence of a direct employment agreement with the Indian entity did not negate the substance of the arrangement. Applying the principles governing secondment and the treaty concept of permanent establishment, the presence of employees in India for rendering services to the Indian associated enterprise was sufficient to constitute a PE. The nomenclature of the arrangement and the continued foreign employment link were treated as material indicators of the real relationship.

Conclusion: The finding of a permanent establishment in India was upheld and this issue was decided against the assessee.

Issue (ii): Whether the relocation expenses and global profitability data required verification for attribution of profits to the alleged permanent establishment.

Analysis: The relocation expense base was disputed because it was said to include amounts relatable to employees other than the seconded personnel. The global profitability figures were also not examined on the footing required by the directions issued earlier. These were treated as verification issues. The matter of profit attribution had to be reconsidered by the Assessing Officer after examining the individual expense items and the audited/global profitability material, and profit could then be attributed in accordance with the treaty framework.

Conclusion: This issue was restored to the Assessing Officer for verification and reconsideration, in favour of the assessee for statistical purposes.

Issue (iii): Whether the rejection of the rectification request and the grounds relating to penalty and interest survived for adjudication.

Analysis: Once the relocation-expense attribution issue was restored in the main appeal, the rectification dispute no longer required separate adjudication. The grounds relating to penalty initiation and interest were either premature or consequential and did not call for substantive decision.

Conclusion: These matters were not separately adjudicated and were treated as infructuous or academic.

Final Conclusion: The PE finding was sustained, but the computation-related questions were sent back for fresh verification, leaving the assessee with only partial relief.

Ratio Decidendi: In a secondment arrangement, continued foreign employment links and service deployment in India can constitute a permanent establishment, and profit attribution must be based on verified facts and treaty principles rather than on an untested broad cost base.

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