Legal Chronicle

November 2023

UJA | Legal Chronicle November - 2023

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The Legal Department at UJA is delighted to impart certain legal knowledge as construed under Legal Chronicle to keep the readers aware of the recent updates and developments that revolve around various aspects of the law. Our ultimate goal is to enable our readers to develop a sense of familiarity with the complexities of Indian as well as International Law.

With our proven expertise and knowledge, the Chronicle shall uncover the intricacies of various branches of law like International Law, Labour Law, Intellectual Property, Alternative Dispute Resolution, Business, and Corporate laws.

In this edition of Legal Chronicle, we have analyzed the important legal developments that extensively highlight distinct aspects of law and profoundly make arrangements to discuss the importance of the Secondment Transactions.

We hope that this edition creates a sense of enthusiasm for our readers and successfully delivers the plethora of legal knowledge as intended. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at


Secondment has evolved as a widely used commercial global mobility concept. The term Secondment refers to the temporary transfer of an employee from their current position to work for another department or project within or outside the organization. Secondments may occur domestically, or a company can transfer the secondee for an international assignment. 

There are three necessary parties to a secondment agreement:

  1. The organization that deploys the secondee may be referred to as the “employer” or “original employer.”
  2. The seconded employee, who gets seconded, is referred to as the “employee” or the “secondee.” A secondee is usually selected for the secondment based on the expertise and skills the secondee may contribute to the host organization.
  3. The company to which the secondee is to render services and is seconded to is referred to as the “host.” The host company undertakes the secondee for a defined period for a project or assignment.

A secondment agreement outlines the employees’ responsibilities that relate to the host company. These responsibilities often dictate the employee’s day-to-day duties during the secondment and require the secondee to adhere to the organization’s policies. In a secondment arrangement, it is necessary for the original employer and host to clearly define the scope of the work of the secondee, working hours, and parameters to review performance during the secondment.

Types of Secondment

1. Internal Secondment:

When an employee is temporarily assigned to a different department or team within the same organization. It is considered an internal secondment. This type of secondment is governed by the internal policies of the original employer.

UJA | Legal Chronicle Types of Secondment
2. External Secondment:

This involves the temporary transfer of an employee to work with another organization. This could be part of a collaborative project or as part of an exchange program. In such cases, the secondment is governed by terms and obligations outlined in the secondment agreement. 

3. International Secondment:

Similar to an external secondment, this involves the secondee working in a different country, often to facilitate global collaboration or to provide international exposure. A parent company may second an employee to its subsidiary or affiliate company based in a different country. In an international secondment compliance related to employment laws, taxation, and immigration come into the picture.

At times, secondment may be for a short term or a long term, this may typically last for a few weeks or months and is focused on specific projects or tasks. The duration of the secondment is usually determined based on the requirements of the host or employer. Secondments are beneficial for both employers and employees, as they foster skill development, and knowledge exchange, and can enhance overall organizational effectiveness. 

Need of Secondment

Secondment serves several purposes and can be beneficial for various stakeholders:

1. Protects Interest of all the parties included in the Secondment:

By defining clear terms, obligations, duties, compliances etc.. and all other terms in the Secondment Agreement, it mitigate the risk of differences/disagreements between all the parties arising in future, if any pertaining to the responsibilities, obligation, defaults etc.

2. Skill Enhancement and Professional Development:

Through secondments, employees are presented with opportunities to cultivate new skills and acquire experience in diverse areas of the business, thereby augmenting their overall skill set and transforming them into more adaptable professionals.

3. Knowledge Transfer:

Secondments facilitate the exchange of knowledge and best practices among disparate teams or departments. The insights gained by an employee during a secondment can be brought back to their original team, contributing to the collective learning of the entire organization.

4. Career Development:

Regarded as a favorable career development opportunity, secondments allow employees to confront new challenges, broaden their professional networks, and potentially explore novel career paths within the organization.

5. Employee Retention:

By offering secondment opportunities, organizations can implement effective retention strategies. Employees are more likely to remain with a company that invests in their professional development, providing avenues for growth and advancement.

6. Flexibility in Workforce Planning/Management:

Secondments grant organizations the flexibility to allocate resources to areas of greatest need without resorting to external hiring or committing to long-term obligations. This adaptability proves particularly advantageous during periods of heightened workloads or special projects.

7. Cost Savings/Considerations:

Employers can realize cost savings through secondments, as these often involve temporary reassignments instead of recruiting, hiring, and training new personnel.

This approach proves to be more cost-effective in various scenarios.

8. Cultural Exchange:

In instances where secondments involve working in different locations or collaborating with diverse teams, they contribute to a sense of cultural exchange within the organization. This fosters a more cohesive and globally aware workforce.

9. Relationship Building:

Secondments serve as a mechanism to strengthen relationships between distinct teams or departments. The close collaboration fosters the development of professional connections and a deeper understanding of each team member’s roles and responsibilities.  

10. Increased Motivation and Engagement:

opportunity to shoulder new challenges and responsibilities during secondments often experience heightened motivation and job satisfaction. This, in turn, translates into elevated levels of engagement and productivity.

Overall, secondment can be a strategic tool for both employees and organizations, fostering learning, growth, flexibility, and collaboration while meeting temporary business needs effectively.

UJA | Legal Chronicle Need of Secondment


1. Contractual Ambiguities:

It is quintessential to have well-defined and clear terms in the secondment agreement; legal challenges may arise from unclear or ambiguous terms in the secondment agreement, leading to disputes over roles, responsibilities, and duration. To avoid discrepancies, it is important to execute an agreement that outlines the terms without any ambiguities.

2. Compliance with Employment Laws:

In the case of international secondment, there arises the question of labor and employment law-related compliances.  Ensuring compliance with employment laws in both the home and host locations can be complex, especially when regulations differ. Thus, it is essential to understand the impact the employment laws may have on the secondment of the employee. 

3. Visa and Work Authorization:

Immigration processes can be tedious and require fulfillment of obligations laid down by the concerned authorities. Securing appropriate visas and work authorizations for the seconded employee in the host country is a legal necessity that demands careful attention to the immigration laws of the host country. 

4. Liability and Insurance:

Depending upon the nature of the services provided by the host as well as the original employer. It becomes crucial to determine the liability and seek adequate insurance coverage in case of accidents or incidents during the secondment. This step ensures that the liability of each party is defined and limited. 

5. Tax Implications:

Understanding and managing tax implications for the seconded employee in both the home and host countries is essential to comply with tax laws. 

This also makes it vital for the organization to understand the tax-related impact on the secondment. 

6. Non-Compete and Non-Solicitation Agreements:

While drafting the secondment agreement, it is essential to ensure that the non-compete and non-solicitation clauses in the agreement do not contradict the existing roles and responsibilities of the secondee.

UJA | Legal Chronicle Challenges

Expert's Cubicle

Picture of Neha Raheja
Neha Raheja

Partner - Direct Tax

Brief Analysis

Secondment and Related Tax Laws
Increased Profit or Returns on Investment:

Under such an arrangement, an employee is transferred within the same organization from one job to another.

  1. Under a secondment, the employee retains their salary and other employment rights with their primary organization. Secondment is generally undertaken for a temporary basis and on the expiry of the term of secondment, the seconded employee shall return to the original employer.
  2. Secondment is a formal job rotation and is not to be confused with temporary work.

When an expatriate is seconded to India from a foreign country, it becomes essential to adhere to domestic compliance and applicable laws. Similarly, a company that accepts a second employee will also have to adhere to certain compliances and procedures.

Consequences of a Secondment under Various Laws :



Income Tax Act 1961

Under secondment agreements, the expatriate is remunerated by both the organizations, i.e., the home country and the host country, for services rendered in the host country. Considering that the expatriate shall be rendering services to the Indian company, the global income should be offered to tax in India.

Goods & Service Tax

While deciding the real employers of the expats, Hon’ble Supreme Court considered many factors, such as lien on employment of Seconded Employees vested with the overseas entity, the fact that the Indian employer was not empowered to terminate the employment, salary payments in foreign currency, repatriation back to the Overseas entity, etc.

Under such a situation, since the overseas entity is the ultimate employer, the Indian entity is merely the service recipient of the overseas entity, which can be said to have provided the manpower supply service, and hence GST would have to be paid under RCM. Further, the Indian entity will be eligible to claim the input credit of the taxes so paid under RCM against the output liability

Hence, this temporarily causes cash flow blockages for the Indian entity.

Double Taxation Avoidance Agreements

The deputation of seconded employees can be considered a PE of the foreign company in India. However, this is a matter of litigation.

Service PE not Established

The Hon’ble Supreme Court in the case of DIT V/s E-Funds IT Solutions Inc (2017) 251 Taxman 280/399 ITR 34 held that

On the role of deputed employees, the Apex Court noted, in particular, the observations of the High Court that the employees were deputed towards the development of domestic work in India.

The deputed employees were working under the control and supervision of E-funds India, and their remuneration was borne by E-funds India only. Based on the above, the Apex Court accepted the contentions of the taxpayers that they had not created a service PE in India.

Service PE established

In Centrica India Offshore, an earlier ruling on the issue of secondment of employees, the Delhi High Court placed more importance on the legal relationship between the foreign entity and the secondees than the economic relationship between the secondees and the Indian entity. In Centrica, the court held that there was an absence of any employment relationship between the Indian entity and the secondees because the direct costs of the secondees were borne by the overseas entities and the secondees could not sue the Indian entity for default in payment of salaries. The court noted that, although the Indian entity was empowered to terminate the secondment arrangement, the secondees’ underlying employment could not be terminated by the Indian entity. The court concluded that the employment relationship of secondees remained independent and beyond the Indian entity’s control, and the employment of secondees during the course of their secondment continued with the overseas entities.[12] The court further relied on the ruling rendered in Morgan Stanley[13] and held that because the foreign entity was rendering services in India through its employees, the secondees constituted a service PE in India.

Employees Provident Fund

An expatriate has to contribute to the Provident Fund at 12% of their salary.

The expat is exempt from contributing only when India has an SSA with his home country and he contributes to Social Security in his home country.

This article outlines a brief overview of the provisions of secondment. However, it is important that companies and seconded employees alike should understand the implications of the applicable laws vis-à-vis & ensure adherence to avoid penalties due to non – compliance.


This document is intended to provide general information and is not intended to be substituted for any legal or professional advice. This document is meant exclusively for informational purposes and not for advertising or solicitation. UJA has made significant efforts to ensure that the information contained in this document is accurate and reliable. However, the information herein is provided “as is” without warranty of any kind. UJA hereby disclaims all responsibility and liability, whether stated or implied, for the accuracy, validity, adequacy, reliability, or completeness of any information provided under this document. In no event shall UJA be held liable for any losses or damages whatsoever incurred as a result of using this document.

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