ITAT upholds important transfer pricing principles on characterisation and rewards for selling activity

INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD I.T.A. No. 3120/Ahd/2010 – Assessment Year : 2006- 07 Mastek Limited Vs. The Addl. CIT Date of Pronouncement : 29/02/2012 ITAT that the taxpayer’s UK subsidiary was not merely undertaking marketing activities. The Tribunal held that the UK subsidiary should be characterized as a distributor on the basis of its agreement with the taxpayer, selling efforts, market and credit risks and overall business strategies. Furthermore, the Tribunal held that the reward has to be determined with regard to return on sales rather than a mark-up on value ad...