TaxTMI 
TaxTMI 
2026 (6) TMI 44
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.... entity incorporated in Netherlands, hence, is a tax resident of Netherlands. As stated by the Assessing Officer (A.O. for short), the assessee is a group company of FedEx Group, having its headquarters in United States of America (USA for short), which is engaged in the business of providing world wide services in transportation, delivery and allied services, etc. Assessee's area of operation is Middle East and India. As stated by the A.O., the assessee is engaged in transportation of time-sensitive and time-definitive shipments to various destinations around the world and is responsible for the delivery of the freight to the airport/ultimate destination, as the case may be. In connection with such activity, the assessee undertakes to pay duties and taxes outside India, on behalf of the consignors/consignees. It is also stated by the AO that through its Dubai branch, the assessee had entered into Transportation Services Agreements ('TSA') with following two Indian entities: 1. FedEx Express Transportation and Supply Chain Services India Private Limited ('FETSCS'). 2. TNT India Pvt. Ltd. ('TNT India'). 5. Upon execution of these agreements, the assessee agreed ....
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....rtation services at Rs. 868,59,74,043/-. Applying net global profitability rate of 2% to the aforesaid figure, he worked out net profit attributable to PE in India at Rs. 17,37,19,421/- and brought it to tax by applying the rate of 40%. Accordingly, he framed the draft assessment order. 7. Against the draft assessment order, the assessee raised objections before learned DRP, However, assessee did not get any relief before ld. DRP. Accordingly, the draft assessment order was finalized through the final assessment order. 8. Before us, ld. Counsel appearing for the assessee submitted that the Indian entities were subjected to transfer pricing assessments. He submitted, though the Transfer Pricing Officer ('TPO' for short) had proposed adjustments to the ALP declared by the assessee, however, the Tribunal while deciding the appeal for the impugned assessment year had accepted the ALP declared by the assessee. Thus, he submitted, once the transactions between the Indian group entities and assessee were found to be at ALP, no further attribution of profit can be made to the PEs in India. In support of such contention, ld. Counsel relied upon the following decisions: 1. Dir....
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.... to the assessee resulting in acceptance of the ALP declared by the Indian entity. Thus, it has to be concluded that the transaction between the Indian group entities and the assessee were found to be at ALP. That being the factual position on record, it needs to be examined whether further profit can be attributed to the PEs out of the amounts received by the assessee. In case of Director of Income-tax (International Taxation) vs. Morgan Stanley & Co. (supra), the Hon'ble Supreme Court while examining the issue has categorically held that once the transactions between the associated enterprises were found to be at ALP, no further profit can be attributed to the PE. The same view was reiterated by Hon'ble Supreme Court in case of Assistant Director of Income-tax vs. E-Funds IT Solution Inc. (supra). In fact, in assessee's own case in A.Ys. 2018-19 and 2019-20, identical nature of dispute came up for consideration before the co-ordinate bench in the order referred to above. While deciding the issue, the co-ordinate bench has held as under: 21. We have heard rival submissions and also perused the relevant finding given in the impugned orders as well as the orders ref....
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....hin India in respect of its customer packages against payment of fee. Indian AEs are responsible for transportation delivery of the said packages from an Indian airport to its ultimate destination in India or from its origin in India to Indian airport. Likewise, the details of amounts paid by the assessee in the impugned assessment years are as under:- A.Y.2018-19 Amount (INR) LSF from FETSCS 15,52,68,802 LSF to TNT India 70,837,078 Total LSF paid to the Indian AES [A+B] 226,105,880 A.Y.2019-20 Amount (INR) LSF to FETSCS 1,83,65,06,785 LSF to TNT India 91,39,33,547 Total LSF paid to the Indian AES [A+B] 2,75,04,40,332 23. As per Article 7(2) of India-Netherlands treaty, not all the profits of foreign enterprises in India would be taxable in India and it is only those which have economic nexus with India. If compensation to the foreign enterprise in India is justified by FAR analysis and transfer pricing analysis and if it has been found to be at arm's length, then no further income should be attributed to its PE in India, because when for the same transaction, arm's length analysis has been undertaken and is equated....
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....y in India is carried by the Indian AE whose activities have been held to be DAPE for the assessee and if such economic activities have been held to be at arm's length in the case of Indian AEs then it has to be reckoned to have been rightly rewarded, then nothing further survives to be taxed in India in the hands of the assessee. 26. It has been also brought on record that assessee has been subjected to TP adjustment and in the case of the assessee also the transactions have been found to be at arm's length and additionally one of the two Indian AEs have also been subjected to TP adjustment and its transaction with assessee also to be at arm's length and new adjustments have been made. 27. Before us, ld. Counsel had also brought on record and also showed from TP documentation for A.Y.2018-19 of the assessee and both the Indian AEs and also from the TP order of the assessee and TNT India for the same year, that the international transactions of the Indian AEs with the assessee, are at arm's length price wherein the mean margin determined based on five comparable companies in the case of both Indian AEs was 2.85% of income while the assessee has remunerated at a hi....