Markup on costs incurred is not an arm’s length remuneration for sourcing support service and the taxpayer should be compensated on the basis of value of the goods sourced through it

Li & Fung (India) Pvt. Ltd. Vs. DCIT (ITAT Delhi)- ITA No. 5156/Del/2010] Tribunal ruling that the amount of compensation to be received ought to be a reflection of the functions performed, assets deployed and risks assumed by the associated enterprises (‘AE’) whilst discharging the business. On the concept of location savings the Tribunal held that the entire savings are passed on to customers, a part of it is retained by the AE, and the same should be factored in while determining the inter company transfer price. Facts of the case Li & Fung (Trading) Ltd., Hong Kong (“HK A...