Case Law Details
American Express Services India Ltd. Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) in Delhi recently delivered a pivotal decision in the case of American Express Services India Ltd. vs Deputy Commissioner of Income Tax (DCIT), addressing key issues related to transfer pricing adjustments and comparable selections. This case has significant implications for multinational corporations engaged in cross-border transactions and emphasizes the importance of accurate comparable analysis in determining the arm’s length price for transfer pricing purposes.
Background: American Express Services India Ltd., the assessee, was embroiled in a dispute over the transfer pricing adjustments made by the Transfer Pricing Officer (TPO) and subsequently upheld by the Assessing Officer (AO) and the Commissioner of Income Tax Appeals (CIT(A)). The core contention revolved around the selection of comparables for benchmarking international transactions related to marketing support services provided by the assessee.
Grounds of Appeal: The assessee challenged the orders on several grounds, including the erroneous selection of comparables, inappropriate adjustments for differences in working capital, disregard of the principle of natural justice, and failure to consider multiple year data, among others. Additionally, corporate tax issues such as the allowability of depreciation on goodwill and the correct valuation of acquired intangible assets were also contested.
Transfer Pricing Issues: The tribunal’s analysis focused on the methodological flaws in the selection of comparables by the TPO. The assessee argued that the TPO had rejected certain companies and included functionally dissimilar companies in the set of comparables. Furthermore, there were grievances regarding the lack of appropriate adjustments for working capital differences and the reliance on single-year data instead of multiple-year data for determining the arm’s length price.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
