WM India Technical and Consulting Services (P) Ltd. v. DCIT [ITA No. 64/Del/2017, dt. 11-9-2020] : 2020 TaxPub(DT) 3624 (Del.-Trib.)

Expat Support services -- Employee salary payment and reimbursement with a mark up to an AE -- Questionability in TP

Facts:

Assessee was a subsidiary of Wal Mart USA. They had certain Expat employees who were seconded on employment to India to the assessee with the service obligations of these employees were under assessee. The Expat salaries were paid by an offshore Expat support servicing entity and were reimbursed by the assessee at cost.  In the Transfer pricing provisions the assessee's claim of reimbursement of these Expat employee cost was benchmarked by revenue at NIL. Countering the same the assessee manifested the ALP using internal comparable where by similar employees servicing was at cost plus 10% to third parties. Thus since they were not charged any mark up by their AE the reimbursed amount at cost was at ALP under Comparable Uncontrolled Price method. This did not meet the eye of the DRP thereby the ALP was read as NIL. On higher appeal -

Held in favour of the assessee the Expat support service reimbursement of the assessee's employees were at ALP thus no additions under TP was warranted.

Editorial Note: The department questioning the need of the reimbursement itself was incorrect in the first place as the employment obligations of these employees whose costs were reimbursed were with the exclusive control domain of assessee. They ought to pay the salaries of these employees which they sought to do it thru their AE due to globally aligned payroll policies possibly.