SanDisk India Device Design Centre Pvt. Ltd. Vs JCIT (ITAT Bangalore)
SanDisk India Device Design Centre Pvt. Ltd. filed its return for AY 2016-17 declaring total income of Rs.60,43,93,000. The case was selected for scrutiny and, as the assessee had international transactions exceeding Rs.15 crore, the matter was referred to the Transfer Pricing Officer (TPO).
The assessee had international transactions in Software Development Services (SWD), IT Enabled Services (ITeS) and Marketing Support Services (MSS), benchmarked using the Transactional Net Margin Method (TNMM). The TPO accepted the 18% arm’s length margin for the ITeS segment but disputed the assessee’s benchmarking for SWD and MSS.
For the MSS segment, the TPO recharacterised the assessee as a sales agent and applied a 9.76% commission rate, proposing an adjustment of Rs.49,58,58,516. For the SWD segment, the TPO rejected the assessee’s comparables and finalised 17 comparables with an average margin of 25.64%, proposing an adjustment of Rs.35,49,09,827. The TPO also proposed an adjustment of Rs.2,72,41,922 concerning interest paid on an External Commercial Borrowing (ECB).
The draft assessment order additionally proposed additions concerning free-of-cost assets, payments to expatriate employees and bonding/debonding charges. After the DRP proceedings, the final assessment order made an addition of Rs.2,24,07,01,345 to the returned income.
