India vs. Li & Fung (Trading) Ltd. March 2016, ITTA

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Li & Fung (Trading) Ltd., Hong Kong, entered into contracts with its global third party customers for provision of sourcing services with respect to products to be sourced by such global customers directly from third party vendors in India. For the sourcing services, the Hong Kong company received a 5% commission of the FOB value of goods sourced.

The company in India was providing sourcing support services to the Hong Kong group company, and remunerated at cost plus 5 percent mark-up for provision of these services.

The tax administration found that the the company in India should get the 5% commission on the free on board (FOB) value of the goods sourced from India as the Hong Kong company contributed no value.

The Tribunal held that the compensation received by the company in Hong Kong – 5% of the FOB value – should be distributed between the company in India and the company in Hong Kong in the ratio of 80:20 based on there functional profiles.

• The company in India had actually performed all critical functions, assumed significant risks and had also developed unique intangibles over the years.

• The company in Hong Kong did not have either any technical expertise or manpower to carry out the sourcing activities.

 

Se also India vs Li & Fung 2013 and India vs Li & Fung 2011

 

Li_&_Fung_(India)_Pvt._Ltd.,_New_..._vs_Assessee_on_23_March,_2016

 

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