FEDERAL EXPRESS CORPORATION,MUMBAI vs. THE DEPUTY COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION)-2(3)(1), MUMBAI, MUMBAI

Aforesaid matter is a recalled matter since the appeal was earlier disposed-off vide order dated 31/01/2020. However, upon assessee’s miscellaneous application MA No.204/Mum/2020 order dated 06/01/2021, the order has been recalled, though for very limited purpose, in the following manner: -

The plea of the assessee applicant is indeed correct. The Assessing Officer himself had adopted 4% as CLC/TLC ratio, and the same was, as noted by us required to be adopted this year as well. The mention of 7.5% as adjusted CLC/TLC ratio, in paragraph 7, was clearly an inadvertent error. We, therefore, deem it fit and proper to recall the 2 Federal Express Corporation Assessment Year: 2014-15 matter on this point, and refix the matter for adjudication afresh on that point. The Registry is directed to refix the matter for the above purposes, before the regular bench on 29.01.2021. Order accordingly.

The perusal of Tribunal order dated 31/01/2020 would reveal that the assessee was engaged in the business of integrated air and ground transportation of time sensitive shipments. The assessee used its own aircrafts as well as third party aircraft for transportation of these shipments. In case of third part aircrafts, the assessee has been denied treaty protection under Article 8 of India USA DTAA and the profits from these operations were computed by Ld. AO by adopting ratio of commercial line haul (on third party aircrafts) @10% and profit on the same was estimated at global profitability ratio of 4.07% of such revenue. The stand of Ld. AO, upon confirmation by Ld. DRP, was under challenge before this Tribunal wherein the assessee argued for acceptance of actual CLC/TLC ratio of 2.08%. It was further argued that the estimated ratio should not be more than 7.5% as adopted by Ld. AO as a result of MAP proceedings. Further, Ld. AO himself had adopted rate of 4% in previous year and therefore, the same should have been adopted in this year as well. The bench, in para 7, directed Ld. AO to adopt this ratio @7.5%.

During MA proceedings, the attention was brought, inter-alia, to the fact that Ld. DRP had already reduced the ratio to 7.5% against which the assessee was in further appeal before this 3 Federal Express Corporation Assessment Year: 2014-15

The Ld. AR, Shri Dhanesh Bafna, urged for adoption of 4% ratio as adopted by Ld. AO in the immediately preceding year. The Ld. DR, on the other hand, filed written submissions, by drawing attention to the fact that ratio taken by MAP authority for AYs 2007- 08 & 2008-09 was 7.0% & 7.5% respectively against the actual ratio of 3.28% & 3.23% as against 10% adopted by Ld. AO in those years. Thus, MAP authorities made addition of 3.72% & 3.77% in both the years against the actual ratio. Therefore, in the current year, the ratio should be adopted as 5.3% after adding 3.22% (solely for the purpose of rounding) to the actual ratio of 2.08%.

At the outset, the final rates adopted in earlier years, as tabulated by Ld. AR, could be noted as follows: - AY Actual CLC/ CLC / TLC ratio (%) Enhanced CLC / TLC Authority Increase in the TLC ratio considered by the AO ratio (%) as per MAP providing relief enhanced ratio based (%) during assessment order / AO based on (D) on MAP to actual (A) (B) MAP order (C) (E) 2007-08 3.28 10.00

00 MAP 2.13 times 2008-09 4.23 10.00

50 MAP 1.77 times 2009-10 4.17 10.00

50 ITAT / AO 1.80 times 2010-11 4.40 8.00

00 AO 1.82 times 2011-12 3.44 7.00

00 AO 2.03 times

50 AO 2.29 times

00 AO 2.21 times 2014-15 (Assessment 2.08

00 (Reduced to 7.5%

00 (As per the method 1.92 times year under by the Hon'ble DRP) agreed in MAP consideration) proceedings

The appeal stands partly allowed to the extent indicated in the order.