Daily Archives: June 2, 2014


CIT v M/s CUSHMAN AND WAKEFIELD (INDIA) PVT LTD [ITA No.475/2012 dated 23.05.2014] (Delhi HC) Background: The assessee, an Indian company, is engaged in the business of rendering services connected to acquisition, sales and lease of real estate and other services. The assessee reported following transactions under Section 92B: (a) Payment of referral fee of Rs. 1,73,26,631/- by the assessee to several foreign AEs for referring clients, and (b) Payment of Rs. 1,06,39,865/- as reimbursement to CWS (Singapore entity) and CWHK (Hong Kong entity) for costs incurred by them for certain coordination and liaison services in respect of their client, IBM. No benchmarking or a transfer pricing analysis was conducted by the assessee. In this respect, the transfer pricing study submitted by it stated: “A cost sharing agreement is a commercial decision of the company and helps the company liaise with international clients; it helps create a better understanding of client needs and disseminate information of the real estate market in India. The effort of these individuals is not a full marketing effort but provides a liaison and market access basis for the Company. The strong international presence of the Cushman and Wakefield group places it is a better position to identify and engage such a professional in a more cost effective manner than for the Company to do so directly with its own efforts.” In respect of the reimbursement of costs to the AEs, the TPO disallowed deduction of the expenditure. Additionally, the AO disallowed the referral fees as a deductible expenditure, stating that no benefit was derived by the assessee from the referral fees paid to the AEs. The assessee preferred objections before the Dispute Resolution Panel (“DRP”), against both findings. The DRP concurred with the AO, leading to a final assessment order under Section 143(3) read with Section 144C. The assessee then appealed to the ITAT, which held in its favour.  

Reimbursement of costs to AE without markup cannot be treated as ALP in the absence ...