Profit before depreciation is to be considered as Profit Level Indicator for transfer pricing analysis

Reuters India Pvt Ltd Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that profit before depreciation (PBDIT) is to be considered as Profit Level Indicator (PLI) for transfer pricing analysis for benchmarking the international transaction.

Facts- The assessee is wholly owned subsidiary of Reuters , U.K. The Reuters group is a leading global provider of news, financial information, and technology solutions to the world’s media, financial institutions, businesses and individuals. Assessee distributes Reuters products within the territory of India.

During the year under consideration, assessee provided IT Enabled Services to its associated enterprises. For benchmarking the aforesaid international transaction, assessee adopted Transitional Net Margin Method as the most appropriate method with operating profit by total cost as the PLI. The assessee after considering itself as a tested party selected the comparables, and accordingly concluded that its international transaction is at arm’s length price.

Pursuant to reference by AO, TPO vide order passed u/s. 92CA(3) of the Act made adjustment of Rs. 10,58,96,504, to the aforesaid international transaction after inclusion/exclusion of certain comparables.

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