Case Law Details
ACIT Vs Avaya India Pvt. Ltd. (ITAT Delhi)
In the case of ACIT vs. Avaya India Pvt. Ltd. (Income Tax Appellate Tribunal, Delhi), the main issue is the exclusion of Infosys Ltd. as a comparable in determining the arm’s length price for the international transactions carried out by Avaya India Pvt. Ltd. The detailed analysis of this case is as follows:
1. Background: Avaya India Pvt. Ltd. is an Indian company engaged in software development and IT-enabled services. It had international transactions with its overseas associates and enterprises. The company used the Transactional Net Margin Method (TNMM) to benchmark these transactions, and it claimed that the prices were at arm’s length based on the average margin of the comparables selected.
2. The Transfer Pricing Dispute: The Transfer Pricing Officer (TPO) disagreed with Avaya’s benchmarking and introduced new comparables, including Infosys Ltd. The TPO’s adjustment led to the addition of a transfer pricing adjustment by the Assessing Officer.
3. First Appellate Authority’s Decision: Avaya contested the adjustment before the first appellate authority, the Commissioner (Appeals). After considering the arguments and evidence, the Commissioner (Appeals) concluded that Infosys Ltd. should not be treated as a comparable. The decision was based on Infosys’s high turnover, diversified business operations, substantial intangible assets, brand value, intangible and R&D expenses, among other factors.
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