EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.,WASHINGTON vs. ACIT CIRCLE-1(2)(2), INTERNATIONAL TAXATION , DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI G.S. PANNU & SHRI SAKTIJIT DEY
PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeal by the assessee challenges the final assessment
order dated 23.05.2022 passed under Section 143(3) read with section
144C(13) of the Income-Tax Act,1961 for the assessment year 2018-
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19, in pursuance to the directions of learned Dispute Resolution Panel
(DRP).
At the outset, learned counsel appearing for the assessee
submitted, ground no. 1 is general and ground nos. 2 to 6, on
instructions of the assessee, are not to be pressed. Accordingly, ground
nos. 1 to 6 are dismissed as not pressed.
In ground no.7, assessee has challenged the addition of an
amount of Rs.5,68,73,38,333 as fee for Technical Services (FTS)/Fee
for Included Services (FIS) as per the provisions of section 9(1)(vii) of
the Act and Article 12 of the India-USA Double Taxation Avoidance
Agreement (DTAA).
Briefly, the facts are, assessee is a non-resident corporate entity
incorporated in United States of America (USA) and its headquarter is
at Seattle, Washington. As stated by the assessing officer, the assessee
is primarily engaged in the business of providing global logistic
services worldwide. The assessee carries out operations in various
segments, such, as airfreight, ocean freight and ocean services, vendor
consolidation, cargo insurance, purchase order management and
customized logistics information. For the assessment year under
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dispute, assessee filed its return of income on 13.11.2018 declaring
income of Rs.76,39,17,441.
In course of assessment proceedings, the assessing officer
noticed that an amount of Rs.5,68,73,38,333 received by the assessee
from India towards sale of logistic services was not offered to tax on
the plea that such services were rendered from outside India, hence,
not taxable. The assessing officer, however, did not agree with the
submissions of the assessee. Relying upon the decision taken by him
in assessee’s own case in preceding assessment years, the assessing
officer held that the amount received by the assessee is in the nature of
FTS/FIS under Section 9(1)(vii) of the Act and Article 12(5) of the tax
treaty, respectively, hence, the amount is taxable in India.
Accordingly, he framed a draft assessment order by adding back the
amount to the income of the assessee. Against the draft assessment
order, the assessee raised objections before learned Dispute Resolution
Panel (DRP). However, relying upon their decision in assessee’s own
case in assessment year 2017-18, learned DRP upheld the addition.
Accordingly, the assessing officer confirmed the addition in the final
assessment order.
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Before us, it is a common point between the parties that the issue
has been consistently decided in favour of the assessee in assessee’s
own case by the Tribunal in assessment years 2010-11 to 2015-16 and
2017-18.
On perusal of material placed before us, we find, this is a
recurring issue between the assessee and the revenue starting from
assessment year 2010-11. While deciding the issue in assessment year
2010-11, the Tribunal, in ITA No.1740/Del/2015 dated 30.09.2020
has held that the amount received by the assessee from freight/logistic
support services cannot be treated as FTS/FIS either under the Act or
under treaty provisions. Accordingly, the addition was deleted.
Identical view was expressed by the Tribunal while deciding the
appeals for subsequent assessment years, as noted above. In fact,
though, the departmental authorities were conscious of the fact that the
Tribunal has decided the issue in favour of the assessee in earlier
assessment years, however, for the purpose of keeping the issue alive,
a contrary decision has been taken. There being no change either in
the factual or legal position relating to the disputed issue in the
impugned assessment year, respectfully following the consistent view
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of the Tribunal in assessee’s own case in the preceding assessment
years, as mentioned above, we delete the addition made by the
assessing officer. This ground is allowed.
In ground no. 8, the assessee has challenged the addition of an
amount of Rs.6,22,40,433 representing reimbursement of global
account management charges by treating it as FTS/FIS. While framing
the draft assessment order, the assessing officer observed that the
assessee is maintaining a team of employees to manage a set of global
customers of the group having operation in many countries. He
observed that global account managers have been appointed based on
the customers’ location and global accounts managers manage global
customer sales and act as a marketing interface. He observed, global
accounts managers instruct and coach the local account teams under
them and support the account team throughout the whole project. He
observed, nature of services provided by the global account managers
result in transfer of technical know-how and skill, hence, the assessee
has made available skill, technical know-how, for which, it has
received payment. Accordingly, he held that the amount received by
the assessee is in the nature of FTS/FIS both under the Act as well as
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DTAA. While doing so, the assessing officer relied upon the
assessment order passed for earlier assessment years. Following their
decision in assessment year 2017-18, learned DRP upheld the
addition.
Before us, learned counsels appearing for the respective parties
have agreed that the issue stands covered in favour of the assessee by
a number of decisions of the Tribunal in preceding assessment years.
Having considered rival submissions, we find that this is a
recurring issue between the parties continuing right from the
assessment year 2010-11. On going through the relevant orders of the
Tribunal in assessment years 2010-11 to 2015-16 and 2017-18, it is
observed that the issue has been consistently decided in favour of the
assessee in all these years, while holding that the amount received
towards reimbursement of global account management charges is not
in the nature of FTS/FIS. Facts being identical, respectfully following
the decision of the co-ordinate benches, we delete the addition made
by the assessing officer. Ground raised is allowed.
In ground no.9, assessee has challenged the addition of
Rs.1,46,54,597 representing reimbursement of lease line charges as
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royalty under Section 9(1)(vi) and Article 12 of India-USA DTAA. As
could be seen from the facts on record, referring to the amended
provision of section 9(1)(vi) of the Act, the assessing officer held that
the payment received by the assessee towards lease line charges
comes within the term ‘process’, hence, is in the nature of royalty
under Section 9(1)(vi) of the Act. Further, relying upon some judicial
precedents, the assessing officer held that the amount is also taxable as
royalty under India-USA DTAA. Accordingly, he added it to the
income of the assessee. The addition made was upheld by learned
DRP by following their directions in assessment year 2017-18.
Before us, learned counsels appearing for the respective parties
have agreed that the issue has been decided by the Tribunal in favour
of the assessee in assessment years 2011-12 to 2015-16 and 2017-18.
Having considered rival submissions, it is observed that while
deciding identical issue in assessee’s own case in assessment years
2012-13 to 2015-16, the Tribunal in ITA No.1904/Del/2017 and Ors.
Dated 05.01.2022 has held that lease line charges are not in the nature
of royalty. The same view was reiterated by the Tribunal while
deciding the issue in assessment year 2017-18. It is further relevant to
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observe, while considering the allowability of payment made towards
lease line charges at the hands of assessee’s payer, the assessing
officer had held that the payment made is in the nature of royalty,
hence, the assessee was required to deduct tax at source. Since, the
assessee has not done so, the assessing officer made disallowance
under section 40(a)(i) of the Act. However, while deciding the issue in
case of the payer, the Hon'ble High Court held that the payment made,
being not in the nature of royalty, no disallowance under section
40(a)(i) of the Act can be made. Thus, in view of the decision of the
Tribunal in assessee’s own case and the decision of the Hon'ble High
Court in case of the payer, the addition made cannot be sustained.
Accordingly, we delete it. This ground is allowed.
Ground nos. 10 and 11 being consequential, do not require
adjudication.
In the result, the appeal is partly allowed.
Order pronounced in the open court on October, 2022.
( G.S. PANNU ) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER Dated: October, 2022. Mohan Lal
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