Case Law Details
Bank of Nova Scotia Vs DCIT (IT) (ITAT Mumbai)
In the case of Bank of Nova Scotia vs. DCIT (IT), the Mumbai Income Tax Appellate Tribunal (ITAT) addressed transfer pricing adjustments concerning various services provided by the company, including administrative support services, IT-enabled services, and the purchase of precious metals like gold and silver imported from the London branch.
Regarding the purchase of precious metals, the ITAT considered the justification provided by the assessee, which referenced KITCO and Reuters databases for determining transaction prices. However, the Transfer Pricing Officer (TPO) argued that the London Bullion Market Association (LBMA) should be the primary source for estimating bullion trading prices.
The ITAT acknowledged the assessee’s argument that LBMA publishes prices at fixed intervals, while KITCO and Reuters rates cover daily high and low rates, thus capturing market volatility more effectively. The Tribunal found that LBMA rates may not adequately reflect market fluctuations due to their limited publication frequency.
In the case of IT-enabled services (ITeS), the assessee had self-adjusted the Arm’s Length Price (ALP) margin to 15%. However, the TPO made additional adjustments based on a higher margin computed from comparable companies for the fiscal year 2012-13. The Commissioner of Income Tax (Appeals) rejected the assessee’s argument that the self-adjustment fell within the acceptable margin of ±3%.
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