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Tax Publishers 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.

Tax Publishers

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.