DCIT v. Expeditors International (India) (P) Ltd.
[ITA No. 2128/Del/2011, dt. 17-12-2020] : 2020 TaxPub(DT) 5390 (Del-Trib)
International freight forwarding business -- Transfer
pricing -- Sustainability of royalty paid to parent -- Disallowance due to non-deduction
of TDS on Global Account Manager fees
Conclusion: Royalty
paid to AE parent in USA cannot be disallowed under ALP benchmarking alleging
that the international logistics and freight forwarding business was already
benchmarked on (FAR) Functional and risk analysis basis thus royalty further
cannot be allowed.
Global Account Manager allocated cost to assessee cannot be
disallowed for want of TDS as the same paid to US AE is not taxable in India
warranting any TDS.
Facts:
Assessee had paid royalty for the network and branding they
were availing to their US parent AE. It was the case of the AO/TPO that their
entire freight forwarding and logistics business was already measured at ALP on
Functional and risk analysis (FAR) basis. Further to this royalty payment was
not required. On facts assessee plea was that the payment of royalty was to the
parent US AE and not to those entities with whom logistics activities were
done. Thus was a separate transaction and does not warrant any ALP
disallowance. On appeal Commissioner (Appeals) allowed the plea of the
assessee. On higher appeal by revenue --
Assessee had to pay Global Account Manager fees to its US
AE without TDS. It was the case of the assessing officer that the same deserves
disallowance under section 40(a)(i) for want of TDS. On higher appeal the
Commissioner (Appeals) allowed the appeal of the assessee upholding that the
payment of Global Account Manager fees to their US AE does not require any TDS
thus no disallowance is called for. Aggrieved revenue went in higher appeal --
Held in favour of the assessee that --
The payment of royalty being a separate transaction has to
be benchmarked separately outside the logistics business thus does not require
any disallowance citing that the logistics business was already benchmarked
using FAR.
Global Account Manager fee to US AE does not warrant TDS.