Higher price paid to AEs accepted as ALP under the CUP Method, provided there is sufficient economic and commercial justification evidencing the same

Court :Mumbai Bench of the Income-tax Appellate Tribunal

Citation :Cheminova India Ltd Vs ACIT, Mumbai (ITA No. 4865/Mum/05) [13 ITAT INDIA 240 (Mum)]

Brief : Recently, the Mumbai Bench of the Income-tax Appellate Tribunal (‘the Tribunal’) in the case of Cheminova India Ltd Vs ACIT, Mumbai (ITA No. 4865/Mum/05) [13 ITAT INDIA 240 (Mum)]., accepted higher price paid to its Associated Enterprises (‘AEs’) (as compared to unrelated parties) under Comparable Uncontrolled Price (‘CUP’) Method to be the arm’s length price (‘ALP’) based on the economic and commercial justification.

Facts of the case

1. The taxpayer is an Indian company engaged in manufacturing of agrochemicals, pesticides, weedicides and plant growth stimulators. The taxpayer filed its return of income for assessment year (‘AY’) AY 2002-03 declaring a total income of Rs.8.52 crores.

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