APA Relief Upheld

The Bombay High Court upheld the Income Tax Appellate Tribunal’s decision allowing Gemological Institute of America Inc. (GIA US) to reduce its taxable royalty income in India to the extent of royalty refunded to its Indian associated enterprise pursuant to an Advance Pricing Agreement (APA). 

The Court also held that GIA India did not constitute a Permanent Establishment (PE) of GIA US in India under the India–US DTAA. The judgment reaffirms the primacy of the real income doctrine and clarifies the tax consequences of transfer pricing adjustments arising from APAs.