TMI Blog2023 (8) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... five comparable companies in the case of both Indian AEs was 2.85% of income while the assessee has remunerated at a higher margin of 4% on their gross income. Apart from that, the ld. TPO has not recorded any finding that suggests that all the FAR undertaken by each of the parties were not adequately captured which negates any requirement for further attribution of profits in the absence of any left-out functions and risk taking activities. Accordingly, we agree with the contention of the ld. Counsel that once the transactions have been found to be at arm s length, no further profit attribution can be made. In any case, it has been brought on record that assessee had incurred losses in the fiscal year 2018, 2019 and 2020 and ld. AO without analyzing the transactions had made the losses of the assessee into profit just merely rely on the draft report of the CBDT and a recommendary course of action for the profit attribution to the PE. Before, us, ld. Counsel has also demonstrated as to how no income can be taxable in the hands of the assessee looking to the fact that already in relation to the operations carried out by the assessee for its Indian AE already income has been su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement between India and Netherlands ('Treaty') 1. (1.1. - 1.3-) 2. (2.1. - 2.3) c. Arbitrarily assigning ad hoc ratios to origin country, transshipment and destination country- to compute taxable revenue attributable to the alleged PE of the Appellant in India 2. 3. d. Considering a deemed profitability rate of 2 percent despite losses incurred by the Appellant 3. 4. e. Not allowing a deduction of profits already taxed in the hands of the Indian AEs, whose activities are alleged to be creating a PE while computing income taxable in the hands of the Appellant. 4. (4.1. -4-2.) 5. (5.1-5-2) f. Not providing an opportunity of being heard to the Appellant 5. 6. g. On the facts and circumstances of the case, the learned AO erred in not granting the appropriate interest under Section 244A of the Act amounting to Rs. 11,51,739 On the facts and circumstances of the case, the learned AO erred in not granting the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hain management, warehousing within the territory of India, custom clearance and other ancillary services, and has its operations spread across five business segments in India, ie, inbound, outbound, domestic services, support services and pricing related support services segments 8. TNT India is the local operating entity of the acquired TNT Group, in India, and is engaged in the business of courier and express services. Post-acquisition of TNT Express by FedEx Group, TNT India became part of FedEx Group. It is engaged in the business of international express distribution of freight, parcels and documents. In the course of its business operations, TNT India contracts with Indian customers to deliver freight, parcels and documents to destinations outside India, utilizing the services of the overseas Group Network. 9. In this regard, the assessee entered into a Transportation Services Agreement (TSA) with FETSC and TNT India. Pursuant to the said TSA, FETSCS and TNT India engaged the assessee for provision of transportation services outside India (i.e, from and to India), in respect of their respective customers' packages, against payment of International Transportation Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a detailed note in the return of income. It has been stated by the assessee that as per Article 7 of India Netherland DTAA, such income shall be taxable to tax in India only if assessee has a PE in India and the profits in question are effectively connected to the said PE and accordingly, in the absence of a PE in India, ITF is not chargeable to tax in India. However, the ld. AO during the course of the proceedings in the case of the assessee for the Impugned AYS 2018-19 2019-20, alleged that the Indian AEs, to FETSCS and TNT India, were acting as the agents of the assessee in India, thereby constituting PES of the assessee. In this regard, the assessee was directed to furnish its submissions on why the said Indian entities should not be considered as its PEs in India requiring attributing of profits in India. 13. Pursuant to the above, for AY 2018-19, the ld. AO made a reference to the TP Officer under Section 92CA of the Act, for determining the arms length price of the international transactions undertaken by the assessee, which included the transactions between the assessee and its alleged PEs in India. In light of the above, the ld. TP Officer passed the TP order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to TNT India - Rs. 7,08,83,077/- 22,61,05,879 Total attributable to India for outbound and inbound transportation services (A+B) 73,64,38,620 18. The AO undertook the attribution exercise on the same basis as above, for the Impugned AY 2019-20 as well. 19. Before us, the only controversy which has been raised is restricted to the issue of profit attribution to the said DAPE and did not challenge the existence of DAPE despite contending that it had a strong prima facie case that it does not have a PE in India. Before us ld. Counsel submitted that issue that if the payment has been given to get arm s length price, then there is no requirement for attribution of any profit and in its written submission following the decisions have been relied upon. Case Forum Citation 1.Morgan Stanley Co. Hon'ble SC 162 Taxman 165 2.E- Funds IT Solution Inc. Hon'ble SC 86taxmann.com 240 3.Honda Motor Co. Ltd., Japan Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited States of America. Indian AEs have the registered office in India and are primarily engaged in business of door to door delivery of goods, documents within and outside India by air as well as surface distribution in India. These AEs are also engaged in supply chain management, warehousing within the territory of India, custom clearance and other ancillary services. TNT India is the mainly engaged in the business of courier and express services. The assessee has entered into Transportation Services Agreement with both Indian AEs and pursuant to the said agreement, assessee was providing transportation services outside India, i.e., from and to India in respect of their customer packages, against payment of International Transportation Fee (TTF) and International Hub Service Fees (IHSF) respectively to the assessee. The assessee is responsible for transportation of the said packages from Indian airport to its ultimate destination outside of India, and vice-versa. The amounts received for the impugned assessment years are as under:- AY 2018-19 Amount (INR) ITF from FETSCS 82,97,81,497 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and assets and risks of the foreign enterprise in India and if the same are found at arm s length, then there is hardly any scope left from making any further attribution to the PE. The situation would however be different if TP analysis does not adequately reflect the functions performed and the risks assumed on behalf of the foreign enterprise in India, then there would arise a need to attribute profits to the PE for those functions/risks that have not been considered in the TP analysis. Then such determination exercise of attribution would be based on the facts of the case. 24. These propositions has been reiterated by the Hon ble Supreme Court in the case of E-funds (supra) relying on its earlier decision of Morgan Stanley (supra) wherein the Hon ble Supreme Court has held that no further profits could be attributed, even if there existed a PE in India, where transactions between foreign enterprise in India and Indian entity which is the PE, are at arm s length price. Herein, the profits attributable to the PE shall be determined in accordance with Article 7 of India-Netherland Tax treaty, which for sake of ready reference is reproduced hereunder:- 2. Subject to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the ld. Counsel that once the transactions have been found to be at arm s length, no further profit attribution can be made. 28. In any case, it has been brought on record that assessee had incurred losses in the fiscal year 2018, 2019 and 2020 and ld. AO without analyzing the transactions had made the losses of the assessee into profit just merely rely on the draft report of the CBDT and a recommendery course of action for the profit attribution to the PE. Before, us, ld. Counsel has also demonstrated as to how no income can be taxable in the hands of the assessee looking to the fact that already in relation to the operations carried out by the assessee for its Indian AE already income has been subjected to tax in India in the hands of the AE in the following manner:- Particulars AY 2018-19 (Amount in INR) AY 2019-20 (Amount in INR) Profits attributed by the Ld. AO (A) 1,47,28,772 17,91,69,446 Less: Profits already taxed in the hands of FETSCS (B) 5,00,50,249 61,30,37,171 In connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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