ITAT Reiterates: Amount Received Towards Reimbursement of Global Account Management Charges is Not FTS/FIS

ITAT Reiterates: Amount Received Towards Reimbursement of Global Account Management Charges is Not FTS/FIS

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the Assessing Officer (AO) and the Ld. Dispute Resolution Panel (DRP) has erred in holding that amount received towards reimbursement of global account management charges is not in the nature of Fee for Technical Services/Fee for Included Services (FTS/FIS) as per the provisions of Section 9(1)(vii) of the Income Tax Act, 1961 and Article 12 of the India-USA Double Taxation Avoidance Agreement (DTAA).

The factual matrix of the case was that the appellant/assessee- Expeditors International of Washington Inc., is a non-resident company based in Seattle, providing global freight logistics services worldwide.

The asseessee’s grievance was that the AO and the Ld. DRP had erred in holding that fee for freight/ logistic support services received by the assessee for services rendered outside India and reimbursement of Global, Account Management (GAM) charges received by the assessee from Expeditors International (India) Private Limited (EI India) was in nature of FTS/FIS as per the provisions of section 9(1)(vii) of the Income Tax Act, 1961 (for short ‘the Act’) and Article 12 of the DTAA.

Similarly, the AO and the Ld. DRP had erred in holding that the reimbursement of lease line charges received by the assessee from EI India was in nature of royalty under Explanation 2 to section 9(1)(vi) of the Act and Article 12 of the India-USA DTAA.

In this regard, the division member bench of ITAT comprising of Astha Chandra (Judicial Member) and G.S. Pannu (President) observed that the Coordinate bench of the Tribunal for the preceding assessment year’s (AY[s]) had decided the issues raised in AY 2020-21 in favor of the assessee.

The ITAT noted that the Revenue had not brought notice to any change in facts and circumstances in the year under consideration. The Revenue had also not brought notice to any other binding precedent on the issues under consideration.

Accordingly, the ITAT ruled 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; amount received towards reimbursement of global account management charges is not in the nature of FTS/FIS and lease line charges are not in the nature of royalty.