Transfer Pricing – Reimbursement of incentive paid to employees through Indian co.

M/s. Aricent Technologies (Holding) Limited Vs. DCIT (ITAT), Dated: 21^st Jan 2011

Transfer Pricing: Reimbursement of incentive paid to employees through Indian co.

Extract

The TPO in his order held that the payment of incentive to employees is towards technical services rendered by the assessee to the AE and that the AE has entered into such transaction to avoid paying a mark-up on the payments. In the transfer pricing documentation, since the assessee had shown its operating profit margin at 27.95% (OP/TC), the TPO considering such margin, notionally imputed a markup on the said sum of `10,66,08,194 being the payment of incentive to employees by the associated enterprise and accordingly proposed an adjustment of `2,97,96,990.

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