Logwin Air & Ocean India Private Limited Vs ACIT (ITAT Mumbai)
The appeal concerns the final assessment order dated 29.10.2024 issued under sections 143(3), 144C(13) and 144B of the Income Tax Act for AY 2011-12, following directions of the DRP. The assessee, engaged in international freight forwarding and part of the Logwin Group, challenged a transfer pricing adjustment of ₹1,04,21,731 relating to Management Fees, as well as an unrelated corporate tax addition under section 41(1).
The assessee’s international transactions included freight and handling receipts and payments benchmarked under TNMM, along with other transactions such as management fees, reimbursements, software costs, and IT support services benchmarked using “Other Method”. Treating all transactions as inextricably linked, the assessee applied a combined transaction approach and benchmarked them using TNMM. The assessee’s operating margin of 7.52% exceeded the average margin of comparables at 0.91%, leading it to conclude that all transactions, including Management Fees, were at arm’s length.
The TPO disagreed with the assessee’s benchmarking of Management Fees. The TPO held that the assessee did not demonstrate evidence of costs incurred by the associated enterprise or satisfy the Need–Benefit–Rendition test. The TPO treated the payment as duplicative or shareholder activity not requiring compensation and applied the “Other Method” to determine the ALP as Nil, leading to a transfer pricing adjustment of ₹1,04,21,731. The draft assessment order incorporated this adjustment.
