Transfer Pricing

Opting for lower rate of tax under Section 115BAB & getting covered under Transfer Pricing Audit

Income Tax - Opting for lower rate of tax under section 115BAB and getting covered under the Transfer Pricing Audit – Whether exercising the option worth the pain for compliances? 1. Background: Section 115BAB of the Income Tax Act, 1961 (hereinafter “the Act”) is applicable to a “new domestic manufacturing company” which is set up or re...

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Limitation of interest deduction- section 94B – Thin Capitalization

Income Tax - Many countries limit the amount of interest expenses of multinational companies (MNC). An enterprise who has borrowed capital in form of loan from its associate enterprises can claim deduction of interest paid and payable to associated enterprises. Foreign companies have several models to infuse capital in its associated company situated ...

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Why Due dates for Tax/Transfer Pricing Audit & ITR filling should be extended? WHY

Income Tax - Section 44AB of the Income-tax Act, 1961 contains the provisions for the tax audit of an entity. As per these provisions, Tax audit will be conducted by a practicing chartered accountant who ensures the taxpayer have maintained proper books of account and complied with the provisions of the Income-tax Act. In view of the challenges [&hell...

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Transfer Pricing Study – A Simplified Overview

Income Tax - A transfer pricing study examines the pricing of transactions between related two or more associates. By applying and documenting various test methods, it is determined whether the transactions are conducted under market conditions and survive the scrutiny of tax authorities....

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Scope of ‘Real Income Theory’ in Transfer Pricing

Income Tax - 1. INTRODUCTION TO TRANSFER PRICING: In general, Transfer Pricing (TP) refers to determination of Arm’s Length Price (ALP)  for transfer of goods, services and technology between Associated enterprises (generally referred as related parties) who are otherwise known as members of Multi National Entities (MNE) or between unrelated partie...

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Guidance Note on Transfer Pricing Report U/s. 92E of Income Tax Act, 1961

Income Tax - ICAI has released the 8th Edition (August 2020) of the Guidance Note on Report Under Section 92E of the Income Tax Act, 1961 (Transfer Pricing). This Guidance Note was last revised in November, 2019. The ICAI has revised Guidance note on Report under Section 92E of the Income Tax Act, 1961 (Transfer Pricing) based on […]...

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Tax Audit Due Date extension- Writ Filed in Various HC – Status

Income Tax - 1. The Rajasthan Tax Consultants Association vs. Union of India (Rajasthan High Court), D.B. Civil Writ Petition No. 12605/2020 As per sources The Rajasthan Tax Consultants Association has filed a writ with Hon’ble Rajasthan High Court on 19.10.2020 which got registered on 21.10.2020 for Granting extension of Tax Audit due date for AY 2...

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Extend due date for filing of Tax Audit reports, TP Audits & ITR

Income Tax - Request for Extension of due date for filing of Tax Audit reports, Transfer Pricing (TP) Audits and Income-tax returns-AY 2020-21 till 31st March 2021....

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Extend due dates of Tax/Transfer Pricing Audits & Return Filing

Income Tax - Tax Bar Association, Jodhpur has made a representation to Smt. Nirmala Sitharaman, Hon’ble Union Minister of Finance & Corporate Affairs & Request for Extension of due date for filing of Tax Audit reports, Transfer Pricing Audits and Income-tax returns – AY 2020-21 till 31St March 2021. Text of the representation is as follows...

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Extend Due Dates for filing Tax/Transfer Pricing Audit & ITR

Income Tax - Chamber of Tax Consultants has made a representation to Smt. Nirmala Sitharaman, Hon’ble Finance Minister, requesting Extension of Due Dates for filing Tax Audit, Transfer Pricing Audit and Income Tax Return for Assessment Year 2020-21. Text of the representation is as follows:- Date: 7th October, 2020 To, Smt. Nirmala Sitharaman, H...

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Comparables dissimilar in Functionally & Turnover cannot be included by TPO

Agilent Technologies India Pvt. Ltd Vs DCIT (ITAT Delhi) - Agilent Technologies India Pvt. Ltd Vs DCIT (ITAT Delhi) With respect to the Infosys technologies it is the claim of the assessee that the turnover of the above company is such a huge turnover that it is not comparable with the assessee company is software development division. For this proposition ...

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Working capital adjustment subsumes sundry creditors- No further TP adjustment for outstanding receivables

Blue Coat Network (India) Private Limited Vs DCIT (ITAT Bangalore) - The issue under consideration is whether TPO is correct in making an upward adjustment to the transfer price of the Appellant's international transactions on account of imputation of notional interest on outstanding receivables?...

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ITAT Remand Case to AO for Determining ALP of Purchase Transaction of FA by Appellant to its Overseas AEs

Denso India Pvt. Ltd Vs DCIT (ITAT Delhi) - The issue under consideration is whether rejecting the benchmarking approach and methodology followed by the Appellant for determining the ALP of the transactions pertaining to purchase of fixed assets by the Appellant to its overseas AEs is justified in law?...

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Section 10AA Deduction eligible on Voluntary Transfer Pricing Adjustment by Assessee

EYGBS (India) LLP Vs DCIT (ITAT Bangalore) - The issue under consideration is whether denial of claim of deduction u/s 10AA of the Act on transfer pricing adjustment made by the assessee voluntarily is justified in law?...

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No TP adjustment for Overdue Receivables which already been considered in working capital adjustment

Bertelsmann Marketing Services India Pvt. Ltd. Vs DCIT (ITAT Delhi) - The issue under consideration is whether overdue receivables from AEs is considered as an international transaction? ITAT direct the learned transfer pricing officer to delete the addition on account of interest on overdue receivable from associated enterprise. Accordingly ground of the appeal is al...

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Tolerance range for wholesale trading & other cases for AY 2020-21

Notification No. 83/2020-Income Tax [S.O. 3660(E)] - (19/10/2020) - Notification No. 83/2020-Income Tax Central Government hereby notifies that where the variation between the arm's length price determined under section 92C of the said Act and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exc...

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Mutual Agreement Procedure (MAP) Guidance by CBDT

MAP GUIDANCE/2020 - (07/08/2020) - Though erstwhile rules 44G and 44H were in existence for a number of years, detailed information regarding MAP processes and guidance on issues related to such processes were not available in a comprehensive and consolidated manner....

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CBDT Amends Income Tax Rule 10CB

Notification No. 76/2019-Income-tax [G.S.R. 701(E)] - (30/09/2019) - CBDT Amends Income Tax Rule 10CB -Computation of interest income pursuant to secondary adjustments vide Notification No. 76/2019-Income-tax dated 30th September, 2019. MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) New Delhi, the 30th September, 2019 Notification No. 76/...

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CBDT notifies tolerance range for wholesale trading & for other cases

Notification No. 64/2019- Income Tax [S.O. 3272(E).] - (13/09/2019) - Notification No. 64/2019- Income Tax provides for tolerance range of one per cent. for wholesale trading and three per cent. in all other cases for assessment year 2019-20. It is certified that none will be adversely affected by the retrospective effect being given to the notification. MINISTRY OF F...

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Govt notifies Multilateral Convention to implement Measures to Prevent BEPS

Notification No. 57/2019-Income Tax [S.O. 2887(E)] - (09/08/2019) - Whereas the Multilateral Convention to Implement Tax Treaty related Measures to Prevent Base Erosion and Profit Shifting (hereinafter referred to as the “the said Convention”) was signed by India at Paris, France on the 7th day of June, 2017;...

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Recent Posts in "Transfer Pricing"

Comparables dissimilar in Functionally & Turnover cannot be included by TPO

Agilent Technologies India Pvt. Ltd Vs DCIT (ITAT Delhi)

Agilent Technologies India Pvt. Ltd Vs DCIT (ITAT Delhi) With respect to the Infosys technologies it is the claim of the assessee that the turnover of the above company is such a huge turnover that it is not comparable with the assessee company is software development division. For this proposition we look at page number […]...

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Working capital adjustment subsumes sundry creditors- No further TP adjustment for outstanding receivables

Blue Coat Network (India) Private Limited Vs DCIT (ITAT Bangalore)

The issue under consideration is whether TPO is correct in making an upward adjustment to the transfer price of the Appellant's international transactions on account of imputation of notional interest on outstanding receivables?...

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ITAT Remand Case to AO for Determining ALP of Purchase Transaction of FA by Appellant to its Overseas AEs

Denso India Pvt. Ltd Vs DCIT (ITAT Delhi)

The issue under consideration is whether rejecting the benchmarking approach and methodology followed by the Appellant for determining the ALP of the transactions pertaining to purchase of fixed assets by the Appellant to its overseas AEs is justified in law?...

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Section 10AA Deduction eligible on Voluntary Transfer Pricing Adjustment by Assessee

EYGBS (India) LLP Vs DCIT (ITAT Bangalore)

The issue under consideration is whether denial of claim of deduction u/s 10AA of the Act on transfer pricing adjustment made by the assessee voluntarily is justified in law?...

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No TP adjustment for Overdue Receivables which already been considered in working capital adjustment

Bertelsmann Marketing Services India Pvt. Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether overdue receivables from AEs is considered as an international transaction? ITAT direct the learned transfer pricing officer to delete the addition on account of interest on overdue receivable from associated enterprise. Accordingly ground of the appeal is allowed....

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HC refuses to Prematurely pronounce in case related to Transfer Pricing

Hyundai Motor India Ltd. Vs Secretary, Income Tax Department (Madras High Court)

The issue under consideration is whether the writ petition filed against the order of DRP rather than first go for appeal before tribunal is justified in law?...

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No TP adjustment for delayed receivables if Same is already been factored in working capital adjustment

Barco Electronic Systems (P) Ltd. Vs DCIT (ITAT Delhi)

Barco Electronic Systems (P) Ltd. Vs DCIT (ITAT Delhi) We have noted that the assessee is not charging interest on overdue debts from the third parties and also the assessee is a debt free company and not paying any interest on funds utilized is business. We have also noted that the assessee company has a […]...

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ITAT excludes comparable having turnover more than 31 to 62 times

Transcend MT Services Pvt. Ltd. Vs DCIT (ITAT Delhi)

Transcend MT Services Pvt. Ltd. Vs DCIT (ITAT Delhi) Assessee has also argued for exclusion of Infosys BPO Ltd, which is having the turnover more than 31.29 times, and TCS E serve Ltd having turnover of 62 times larger than the assessee does. Therefore, for the reasons given by us for exclusion of I gate […]...

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Risk adjustment / Benchmarking of international transactions- ITAT Remands case back to AO

GCO Technologies Centre Private Ltd. Vs ITO (ITAT Mumbai)

GCO Technologies Centre Private Ltd. Vs ITO (ITAT Mumbai) We have deliberated at length on the aforesaid issue under consideration and are unable to persuade ourselves to subscribe to the projection of the aforesaid comparable company viz. M/s Cather Consultancy Services Pvt. Ltd by the assessee as a profit making company during the finan...

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No TP addition in respect of international transaction of payment of Regional Service Charges in case value within tolerance range

Goodyear South Asia Tyres Private Limited Vs ACIT (ITAT Pune)

No transfer pricing addition in respect of international transaction of payment of Regional Service Charges pertaining to five intra-group services could be made because even if presume that the comparable uncontrolled transaction was at zero mark-up, still the value of the international transaction was within the notified tolerance range...

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Guidance Note on Transfer Pricing Report U/s. 92E of Income Tax Act, 1961

ICAI has released the 8th Edition (August 2020) of the Guidance Note on Report Under Section 92E of the Income Tax Act, 1961 (Transfer Pricing). This Guidance Note was last revised in November, 2019. The ICAI has revised Guidance note on Report under Section 92E of the Income Tax Act, 1961 (Transfer Pricing) based on […]...

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Posted Under: Income Tax |

Opting for lower rate of tax under Section 115BAB & getting covered under Transfer Pricing Audit

Opting for lower rate of tax under section 115BAB and getting covered under the Transfer Pricing Audit – Whether exercising the option worth the pain for compliances? 1. Background: Section 115BAB of the Income Tax Act, 1961 (hereinafter “the Act”) is applicable to a “new domestic manufacturing company” which is set up or re...

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Posted Under: Income Tax |

AMP expenditure do not constitute an international transaction

Bacardi India Pvt. Ltd. Vs ACIT (ITAT Delhi)

Bacardi India Pvt. Ltd. Vs ACIT (ITAT Delhi) Under Sections 92B to 92F, the pre-requisite for commencing the TP exercise is to show the existence of an international transaction. The next step is to determine the price of such transaction. The third step would be to determine the ALP by applying one of the five […]...

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Concern with extraordinary event cannot be comparable in year of amalgamation

American Express Services India Private Ltd. Vs DCIT (ITAT Delhi)

American Express Services India Private Ltd. Vs DCIT (ITAT Delhi) The assessee is aggrieved by the inclusion of the Accentia Technologies Ltd. in the final set of comparables. The plea of the assessee before us is that the said concern is engaged in diversified services which includes HRCM (using SaaS model), also is KPO and […]...

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Mere use of brand name or logo owned by AEs by assessee cannot be construed as expenses incurred for AMP

Xerox India Ltd. Vs DCIT (ITAT Delhi)

Expenditure incurred on Advertisement, Marketing and Promotion (AMP) for creating market intangibles including brand value in favour of Associated Enterprises was not  considered as an international transaction as mere use of brand name or logo owned by the AEs by assessee would not automatically lead to influence that any expenses that ...

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Draft Format of Form 3CEB with Annexures for AY 2020-21

Draft Format of Form 3CEB for AY 2020-21 amended vide Notification No. 82/2020 dated 1st October, 2020 in Excel /Word Format As Form No. 3CEB (Transfer Pricing Audit Report) has been amended recently vide Notification No. 82/2020 dated 1st October, 2020. However, the utility is yet to be updated. So, sharing the updated draft of […...

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Posted Under: Income Tax |

Tax Audit Due Date extension- Writ Filed in Various HC – Status

1. The Rajasthan Tax Consultants Association vs. Union of India (Rajasthan High Court), D.B. Civil Writ Petition No. 12605/2020 As per sources The Rajasthan Tax Consultants Association has filed a writ with Hon’ble Rajasthan High Court on 19.10.2020 which got registered on 21.10.2020 for Granting extension of Tax Audit due date for AY 2...

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Posted Under: Income Tax |

Transfer Pricing: Functionally dissimilar comparable cannot be adopted

M/s. Blue Yonder India Private Limited, (Formerly JDA Software India Private Limited) Vs DCIT (ITAT Bangalore)

M/s. Blue Yonder India Private Limited, (Formerly JDA Software India Private Limited) Vs DCIT (ITAT Bangalore) E-INFOCHIPS LIMITED- The Annual Report of e-Zest Solutions Limited for assessment year 2010-2011 (placed at page 527 to 534 of the paper book) clearly demonstrates that it is engaged in end to end product development, including p...

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Assessee can take a stand contrary to their TP study

LSI India Research & Development India Private Limited, [Erstwhile Broadcom Communications Technologies Private Ltd. since merged] Vs DCIT (ITAT Bangalore)

It is open to the parties in Transfer Pricing cases to take a stand contrary to their TP study, if they contend that the stand taken in the TP study is contrary to facts or was erroneous. Such a claim cannot be disregarded only on the basis that it is contrary to Assessee’s own stand in the TP study....

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Extend due date for filing of Tax Audit reports, TP Audits & ITR

Request for Extension of due date for filing of Tax Audit reports, Transfer Pricing (TP) Audits and Income-tax returns-AY 2020-21 till 31st March 2021....

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Posted Under: Income Tax | ,

Limitation of interest deduction- section 94B – Thin Capitalization

Many countries limit the amount of interest expenses of multinational companies (MNC). An enterprise who has borrowed capital in form of loan from its associate enterprises can claim deduction of interest paid and payable to associated enterprises. Foreign companies have several models to infuse capital in its associated company situated ...

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Posted Under: Income Tax |

Tolerance range for wholesale trading & other cases for AY 2020-21

Notification No. 83/2020-Income Tax [S.O. 3660(E)] (19/10/2020)

Notification No. 83/2020-Income Tax Central Government hereby notifies that where the variation between the arm's length price determined under section 92C of the said Act and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one per cent. of the latter in respe...

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Penalty justified for failure to maintain Transfer Pricing Documents

DCIT Vs Convergys Customer Management Group Inc. (ITAT Delhi)

DCIT Vs Convergys Customer Management Group Inc. (ITAT Delhi) It is mandatory for all taxpayers, without exception, to obtain an independent accountant’s report in respect of all international transactions between associated enterprises or specified domestic transactions. The report has to be furnished by the due date of the tax ret...

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Provision for Sales return not allowable as deduction under section 37

Nike India Pvt Ltd vs DCIT (ITAT Bangalore)

Nike India Pvt Ltd vs DCIT (ITAT Bangalore) The AO noticed that the assessee has claimed deduction for ‘Provision for sales returns’. When enquired, the assessee submitted that it creates a provision for anticipated sales returns based on a percentage of the sales made each month. It was further submitted that the provision is...

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AO bound to refer to TPO for computation of ALP of international transactions

Bank of India Vs JCIT-OSD (ITAT Mumbai)

Bank of India Vs JCIT (ITAT Mumbai) Conclusion: PCIT rightly directed Bank of India’s case to TPO for determination of arm’s length price (ALP) in relation to international transactions and specified domestic transactions under revision proceedings as it was binding on AO as per the CBDT Circular in force at that point of time under [...

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Government concerns are not comparable as they do not have profit motive

Intercontinental Hotels Group (India) Pvt. Ltd. Vs DCIT (ITAT Delhi)

Intercontinental Hotels Group (India) Pvt. Ltd. Vs DCIT (ITAT Delhi) Hon’ble High Court in Philip Morris had directed that M/s. Apitco Ltd. was not good comparable of concerns providing business support services, on the ground that in case of Government enterprises, profit motive is not relevant consideration and the Government company ...

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ITAT upheld TP adjustment for outstanding debtors beyond agreed period

Bharti Airtel Services Ltd. Vs DCIT (ITAT Delhi)

Bharti Airtel Services Ltd. Vs DCIT (ITAT Delhi) In the present case the service agreement clearly says that the amount of payment is to be made by the associated enterprises to the assessee within 15 days. Such payment was not made within that period but beyond that. The learned assessing officer held that the amount […]...

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Extend due dates of Tax/Transfer Pricing Audits & Return Filing

Tax Bar Association, Jodhpur has made a representation to Smt. Nirmala Sitharaman, Hon’ble Union Minister of Finance & Corporate Affairs & Request for Extension of due date for filing of Tax Audit reports, Transfer Pricing Audits and Income-tax returns – AY 2020-21 till 31St March 2021. Text of the representation is as follows...

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Posted Under: Income Tax | ,

Why Due dates for Tax/Transfer Pricing Audit & ITR filling should be extended? WHY

Section 44AB of the Income-tax Act, 1961 contains the provisions for the tax audit of an entity. As per these provisions, Tax audit will be conducted by a practicing chartered accountant who ensures the taxpayer have maintained proper books of account and complied with the provisions of the Income-tax Act. In view of the challenges [&hell...

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Posted Under: Income Tax |

Extend Due Dates for filing Tax/Transfer Pricing Audit & ITR

Chamber of Tax Consultants has made a representation to Smt. Nirmala Sitharaman, Hon’ble Finance Minister, requesting Extension of Due Dates for filing Tax Audit, Transfer Pricing Audit and Income Tax Return for Assessment Year 2020-21. Text of the representation is as follows:- Date: 7th October, 2020 To, Smt. Nirmala Sitharaman, H...

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Posted Under: Income Tax | ,

Benchmarking of cost to cost reimbursement of expenses was not within TPO jurisdiction

Danisco India Pvt. Ltd. Vs DCIT (ITAT Delhi)

Benchmarking of cost to cost reimbursement of expenses was not within the jurisdiction of the TPO while computing the arm's length price of the international transaction u/s 92CA of the Act....

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ALP of higher AMP expenditure cannot be determined without first establishing that it is an international transaction

Yakult Danone India Pvt. Ltd. Vs DCIT (ITAT Delhi)

Approach of the learned transfer pricing officer of determining ALP of international transaction of incurring of higher AMP expenditure cannot be benchmarked either on Bright line test bases or on transactional net margin method unless first it is established that there existed an international transaction. Accordingly all the grounds of ...

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ITAT allows to withdrawn appeal challenging TP Adjustment due to APA

Citizen Watches (India) Pvt. Ltd. Vs. ACIT (ITAT Bangalore)

In the instant case, ITAT allows the assessee to withdrawn the appeal filed for challenging the transfer pricing adjustment due to Advance pricing agreement filed u/s 92CC of the Income tax Act....

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Functionally comparable company cannot be excluded from Comparables for non-disclosure of RPT

EMC Software & Services India Pvt. Ltd. Vs. JCIT (ITAT Banglore)

EMC Software & Services India Pvt. Ltd. Vs. JCIT (ITAT Banglore) The assessee seeks inclusion of T2T2 India Ltd. The Ld. A.R. submitted that this company is functionally comparable company. The TPO/DRP has rejected the same only for the reason that the detail of Related Party Transactions (RPT) was not disclosed in the Annual Report. ...

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TP: Appropriateness of one or other method cannot be gone into Section 260A appeal

PCIT Vs. Gulbrandsen Chemicals Pvt. Ltd. (Gujarat High Court)

PCIT Vs. Gulbrandsen Chemicals Pvt. Ltd. (Gujarat High Court) The Tribunal has taken into consideration the voluminous documentary evidence on record for the purpose of coming to the conclusion of adoption of TNMM by the assessee as the Most Appropriate Method of arriving at ALP. The Delhi High Court in the case of Make My […]...

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Companies which are functionally dissimilar cannot be taken as a comparable

TRX Technologies India Pvt. Ltd. Vs DCIT (ITAT Bangalore)

TRX Technologies India Pvt. Ltd. Vs DCIT (ITAT Bangalore) The assessee is contending to exclude from the list of comparables M/s. Acropetal Technologies Limited (Seg.), M/s. Accentia Technologies Limited, ICRA Online Ltd. and Jeevan Scientific Technology Limited. In similar circumstances and for the same assessment year, the jurisdictiona...

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AMP expenditure is not an international transaction

ACIT Vs Mattel Toys (India) Pvt. Ltd. (ITAT Mumbai)

ACIT Vs Mattel Toys (India) Pvt. Ltd. (ITAT Mumbai) Tribunal in assessee’s own case for the A.Yrs.2008-09 and 2009-10  vide order dated 08/07/2016 already held that AMP expenditure is not an international transaction and hence, no ALP adjustment could be made thereon. Respectfully following the aforesaid decision of this Tribunal in as...

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Bright line test not appropriate for benchmarking AMP expenses

Haier Appliances India Pvt. Ltd. Vs. DCIT (ITAT Delhi)

Haier Appliances India Pvt. Ltd. Vs. DCIT (ITAT Delhi) This is not disputed by the Revenue as the TPO in order dated 21.10.2011 considered Vivek Limited as appropriate comparable for benchmarking AMP expenses, applying Bright Line Test. The TPO considered Vivek Limited as comparable as it is trader/re-seller of home appliances and does no...

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Extend timeline for filing of Return, Tax & Transfer Pricing audit

Due date for filing of returns for all the taxpayers for A.Y. 2020-21 be extended to 31st March, 2021 and the due date for filing the tax audit report also be extended to 28th February, 2021. Consequently, the timeline for filing all the reports and certificates under the Act which fall due alongwith or in connection with the ITR filing d...

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Posted Under: Income Tax |

Outstanding Receivables are Part of Working Capital Hence No Separate Benchmarking Required for them

DCIT (LTU) Vs EXL Service.com (India) Pvt. Ltd. (ITAT Delhi)

The issue under consideration is whether the addition made on imputing interest on outstanding receivable from associated enterprises as its separate international transaction and its determination of ALP is justified in law?...

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No TP adjustments for business advances given to AE where Assessee himself is ultimate beneficiary

KEC International Ltd. Vs. DCIT (ITAT Mumbai)

KEC International Ltd. Vs. DCIT (ITAT Mumbai) In this case The undisputed position that emerges are that the advances have been given by the assessee to an entity in which it held 50% share. The assessee has entered into a Joint Venture (JV) agreement with an entity namely Edison Jehamo Power (PTY) Ltd. (EJP) on […]...

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No adjustment for notional interest on receivables if taxpayer is debt free

Global Logic India Ltd Vs DCIT (ITAT Delhi)

Global Logic India Ltd Vs DCIT (ITAT Delhi) No adjustment is to be made on account of notional interest on receivables by relying upon Explanation (i), (a) & (c) of section 92B by treating the continued debt balance as an international transaction. Moreover when the taxpayer is debt free company, there is no question of […]...

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Section 10AA Deduction on Enhanced Income Earned through APA

ACIT Vs EYGBS India Pvt. Ltd. (ITAT Bangalore)

whether the 1st proviso of section 92C(4) is triggered when the income computation for deduction u/s 10AA is enhanced only in the computation of income and no such entries are made in the books of account?...

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Transfer Pricing Study – A Simplified Overview

A transfer pricing study examines the pricing of transactions between related two or more associates. By applying and documenting various test methods, it is determined whether the transactions are conducted under market conditions and survive the scrutiny of tax authorities....

Read More
Posted Under: Income Tax |

Scope of ‘Real Income Theory’ in Transfer Pricing

1. INTRODUCTION TO TRANSFER PRICING: In general, Transfer Pricing (TP) refers to determination of Arm’s Length Price (ALP)  for transfer of goods, services and technology between Associated enterprises (generally referred as related parties) who are otherwise known as members of Multi National Entities (MNE) or between unrelated partie...

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Posted Under: Income Tax |

Extend due date of filing ITR, Tax Audit/Transfer Pricing Report

Request for extension of due date of filing Return of Income (ITR), Tax Audit Report and Transfer Pricing Report for the Assessment Year 2020-21 by Chamber of Commerce and Industry. Dated- 08/09/2020 Mr. P.C. Mody, IRS Chairman Central Board of Direct Taxes Department of Revenue Ministry of Finance Government of India North Block New Delh...

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Posted Under: Income Tax | ,

Dissimilar products cannot be taken to determine gross margin by RPM

Elcome Technologies Private Limited Vs DCIT (ITAT Mumbai)

Resale Price Method (RPM) is a GP margin based method. It is a traditional transaction method. It primarily compares controlled and uncontrolled transactions. Under RPM we can tolerate slight differences in the products distributed by the two types of distributors as long as the broad category of products distributed is the same....

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Reimbursements- Transaction Issue in Transfer Pricing

The most ignored transaction from the transfer pricing perspective is the reimbursement of expenses. However, with the increasing complexity of modern business, it is important for us to properly understand the transaction relating to reimbursement of expenses and understand its benchmarking from an Indian Transfer Pricing perspective. Be...

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Posted Under: Income Tax |

Interest on Overdue Payments – Issues under Transfer Pricing & Solutions

In ongoing commercial transactions amongst multinational group like sale, purchase or transfer of goods/services/assets etc., there arises receivable or payable from one group company to another. This is generally referred to as ‘Overdue Balance’....

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Posted Under: Income Tax |

No TP adjustment for interest on receivables from AE’s if delay is less than industry average

Value Labs Technologies Vs ACIT (ITAT Hyderabad)

TPO has not given any finding on the No. of days delay in receivables. As submitted by the learned AR, the delay was less than 90 days and the industry acceptable period of average is 90 days. The Coordinate Bench of the ITAT in assessee’s own case for the A.Y 2013-14 has taken view that no adjustment is required if the delay is between...

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Section 271GH penalty not leviable if Assessee complies Rule 10D(i)

Procter & Gamble Home Products Private Limited Vs DCIT (ITAT Mumbai)

Procter & Gamble Home Products Private Limited Vs DCIT (ITAT Mumbai) Main allegation of the revenue is that of non-furnishing of audited AE and non AE segmental as well as documents regarding choice of foreign entity as tested party. We also noted that any other reason for levy of penalty is for non-furnishing of audited […]...

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LIBOR based interest rate cannot be applied to benchmark a financial transaction which is not denominated in foreign currency

Assotech Moonshine Urban Developers Pvt. Ltd. Vs DCIT (ITAT Delhi)

Ld. AO/ Ld. TPO/ Ld. DRP erred in using a LIBOR based interest rate to benchmark the international transaction of payment of interest on FCCDs denominated in Indian Rupees...

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Assessment Initiated on Non-Existing Entity Considered as Void ab Initio

Atos India Pvt. Ltd. Vs DCIT (ITAT Mumbai)

Atos India Pvt. Ltd. Vs DCIT (ITAT Mumbai) The issue under consideration is whether the assessment initiated in the name of a non-existing entity is justified in law? ITAT states that, even after the learned DRP taking into account the fact of merger and passing order by giving directions to the learned AO in the […]...

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ITAT explains Transfer pricing implications for interest free loan

Motherson Sumi Infotech & Designs Ltd. Vs DCIT (ITAT Delhi)

Motherson Sumi Infotech & Designs Ltd. Vs DCIT (ITAT Delhi) We find that the next issue raised is against the transfer pricing adjustment made on account of interest due on receivables outstanding. The said issue stands covered in favour of the assessee by the decision of the Tribunal in M/s. Global Logic India Ltd. for […]...

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AE cannot be considered for the purpose of comparable

Lonsen Kiri Chemical Industries Ltd. Vs DCIT (ITAT Ahmadabad)

Lonsen Kiri Chemical Industries Ltd. Vs DCIT (ITAT Ahmadabad) Once the comparable company becomes the AE of the assessee in the year under consideration, then such company cannot be considered for the purpose of comparable. Case Summary: – Facts of the case: The assessee is a joint venture of two companies namely Well Prospering Ltd...

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ITAT refer TP adjustment for Notional Interest to Special Bench

Ampacet Cyprus Limited Vs DCIT (ITAT Mumbai)

The issue under consideration is whether transfer pricing adjustment as notional interest and charging it to tax, disregarding the provisions of Article 11 of India Cyprus DTAA is justified in law?...

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No second innings should be given to appreciate same set of facts: ITAT

ACIT Vs Volvo Auto (India) Private Limited (ITAT Delhi)

ACIT Vs Volvo Auto (India) Private Limited (ITAT Delhi) The issue under consideration is whether CIT(A)is correct in deleting the addition made on application of CUP method for determination of ALP of international transactions by the A.O.? ITAT states that, the AO’s observation that this expenditure has been debited to the profit and l...

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ITAT remand back Matter to AO for Re-Examination of Relocation Expense & Related TDS Compliance

American Express (I) P. Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether disallowance of relocation expenses u/s 40(a)(i) of the Act and non granting of tax deducted at source with respect to that expense is justified in law?...

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No addition for AMP transactions in absence of International Transaction between Taxpayer & AE

Xerox India Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether addition made on account of Advertisement, Marketing, and Sales Promotion (AMP) transactions is justified in law?...

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Transfer Pricing adjustment made based on incorrect appreciation of facts is not sustainable

In our considered opinion, no second innings should be given to appreciate the same set of facts which were already before the Assessing Officer. Moreover, in the remand report, the Assessing Officer himself has accepted that if the management fees had not been paid by the appellant, the true up adjustment received would have been Rs. 2.5...

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Posted Under: Income Tax |

Civil and Interior Works expense eligible for Depreciation at 10%

Microsoft Corporation (India) Pvt Ltd Vs DCIT (ITAT Delhi)

Microsoft Corporation (India) Pvt Ltd Vs DCIT (ITAT Delhi) The issue under consideration is whether expenditure on account of civil and interior works liable for depreciation at 10% or at 15%? ITAT states that, they have perused the items of the expenditure which has been reproduced by the assessing officer in the assessment order and [&h...

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Debt free Company- No Adjustment for interest free loan to Associated Enterprise

Value Labs Vs ACIT (ITAT Hyderabad)

Value Labs Vs ACIT (ITAT Hyderabad) The issue which arises in the present appeal is against the adjustment made in the hands of the assessee on account of interest due on outstanding Receivables by treating the same as international transaction. Much reliance is placed on the explanation inserted under section 92B of the Act with [&hellip...

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CbCR- Advanced Analysis

In this article you will find detailed analysis of certain terms and issues which either OECD or certain other countries have clarified. Notification in respect of BEPS Action plan 13 is expected shortly from CBDT. ...

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Posted Under: Income Tax |

CBCR: Why Such Reporting, By Whom, When, What Are the Difficulties and Benefits

CbCR (Country by Country Report) is one of the recent amendment which has created a lot of hue and cry in the industry, hence here in this article the author will provide the basic concepts related to CbC reporting for all the Chartered Accountants. ...

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Posted Under: Income Tax |

Associated Enterprise under transfer pricing

Section 92A (1) of the act provides that two enterprises shall be treated as Associated enterprises only when one of the enterprises participates in management, control or capital of the other enterprise....

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Posted Under: Income Tax |

OECD’s Unified Approach on Pillar One to Address the Challenges Arising from Digitalization of Economy: A Critical Analysis

This article provides a comprehensive summary of the efforts undertaken by OECD in addressing the issues relating to the Tax Challenges Arising from the Digitalisation of the Economy. The article then discusses the intricacies of the proposed Unified Approach issued by OECD Secretariat and endorsed by the OECD Inclusive Framework on Base ...

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Posted Under: Income Tax |

Traditional Transaction Methods in Transfer Pricing: An Appraisal

Transfer Pricing provisions in Chapter X of the I-T Act 1961 entitled Special Provisions Relating to Avoidance of Tax enables the Transfer Pricing Officer in determining the Arm’s Length Price (ALP) in relation to an international transaction between Associated Enterprises commonly referred as controlled transaction, by using the Most A...

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Posted Under: Income Tax |

Mutual Agreement Procedure (MAP) Guidance by CBDT

MAP GUIDANCE/2020 (07/08/2020)

Though erstwhile rules 44G and 44H were in existence for a number of years, detailed information regarding MAP processes and guidance on issues related to such processes were not available in a comprehensive and consolidated manner....

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TP Adjustment for notional Interest on outstanding receivables

Global Logic India Ltd. Vs ACIT (ITAT Delhi)

Global Logic India Ltd. Vs ACIT (ITAT Delhi) Now coming to the next issue raised in the present appeal against the transfer pricing adjustment made on account of interest due on receivables outstanding. The said issue stands covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for Assessment […...

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Share application money cannot be treated as Loan unless Transaction is bogus

Voltas Limited Vs ACIT (ITAT Mumbai)

It is not open to the revenue authorities to recharacterize the transaction unless it is found to be a sham or bogus transaction. While there are no specific powers vested in the TPO to recharacterize the transaction, even under the judge made law, such rechracterization can be done by the revenue authorities when the transactions are fou...

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Transfer Pricing- Corporate Guarantee as an International Transaction

In Transfer pricing proceedings, corporate guarantee given by assessee to its foreign AE is always disputed by the department as an international transaction and adjustment determined on the basis of average bank guarantee rates. However, in number of judgements by tribunal and HC, the stand of the department is overruled and relief grant...

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Posted Under: Income Tax |

ITAT explains legal effect of Omission of clause (i) of Section 92BA

M/s. Bhartia-SMSIL (JV) Vs ITO (ITAT Guwahati)

Since clause (i) section 92A was omitted with effect from 1st April, 2017 and the effect of such omission is that the said clause(i) was never existed in the statute. Hence, Ld. PCIT can not exercise the jurisdiction u/s 263 of the Act....

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Advertisement, Marketing & Promotion Expense- Controversy

Due to the lack of statutory law and legislative framework governing transfer pricing, the taxability of AMP expenses has become a biggest controversy and dilemma, and it also offers no guidance in situations where an express agreement does not exist. ...

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Posted Under: Income Tax |

Limitation of Interest Deduction in Certain Cases [Section 94B]

Preference of debt over equity as a measure to finance businesses: Debt and equity are the instruments through which a company is generally financed or capitalized. The manner in which a company is capitalized has a major impact on the amount of taxable profit as the tax laws of countries generally provide for a deduction […]...

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Posted Under: Income Tax |

Notional Interest on loan to AE assessable as income, if assessee having PE in India

Sabre Asia Pacific Pte. Ltd. Vs DCIT (ITAT Mumbai)

Whether notional interest income on the loan (interest-free) that was advanced by the assessee to its AE would be assessable as the income of the assessee which has a business connection or Permanent Establishment (PE) in India?...

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Section 40A(2)(b) cannot be invoked merely for Unregistered agreement

DE Diamond Electric India Pvt Limited Vs ACIT (ITAT Delhi)

DE Diamond Electric India Pvt Limited Vs ACIT (ITAT Delhi) One of the ground taken by the AO for invoking section 40A(2)(b) is the agreement between the parties has not been registered. In our opinion, an unregistered agreement cannot be a ground for invoking provisions of section 40A(2)(b) of the Act in absence of requirement […]...

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AMP expenditure incurred by assessee not falls within purview of international transaction

JCIT Vs General Mills India Pvt. Ltd. (ITAT Mumbai)

As per the prevailing legal position, the AMP expenditure incurred by the assessee in India cannot come within the purview of international transaction. That being the case, the adjustment made by the Transfer Pricing Officer cannot survive. Therefore, we do not find any necessity to restore the issue to the Assessing Officer....

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YRIPL & YRMPL do not constitute DAPE or PE of Yum! Restaurants in India

DDIT Vs Yum! Restaurants (Asia) Pte. Ltd. (ITAT Delhi)

The issue which is arising in the present appeal is whether there is DAPE. The Assessing Officer has alleged the existence of DAPE on account of alleged marketing activities undertaken by Indian entity on behalf of the assessee company....

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AMP expense can’t be disallowed, Merely because Excess amount has been spent on Advertisement

Gillatte India Ltd. Vs ACIT (ITAT Jaipur)

Whether the TPO was legally justified in holding that AMP expenditure was not an international transaction even though the assessee was performing DEMPE functions for its AE and doing activity of brand building?...

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Range Concept and Multi-year data

Since the time the transfer pricing (TP) provisions were first introduced in India in 2001 and the concept of the arm’s length price introduced, taxpayers have been grappling with issues arising from the requirement to use the arithmetic mean to defend the arm’s length nature of their transactions....

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Posted Under: Income Tax |

Mere Form No. 3CEB filing cannot make assessee liable for Section 92BA investigation

Ashish Subodhchandra Shah (HUF) Vs PCIT (ITAT Ahmedabad)

Merely because a prescribed Form No. 3CEB was filed in accordance with Rule 10E r.w.s. 92BA of the Act would not make an assessee susceptible to onerous investigation proceedings on such transactions where the assessee prima facie demonstrates that Section 92BA of the Act is wholly inapplicable in any manner at the first instance...

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No TDS on Payment Gateway Charges paid by Make My Trip

MakeMy Trip (India) Pvt. Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether the Payment Gateway facilities provided by banks are liable for TDS provisions?...

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Section 10A benefit allowed on Enhanced Income pursuant to MAP Resolution

Dell International Services India Private Limited v. DCIT (ITAT Bangalore)

Dell International Services India Private Limited v. DCIT (ITAT Bangalore) Benefit of Section 10A of the Act is Allowed on Enhanced Income Pursuant to Mutual Agreement Procedure (MAP) Resolution Outcome: In favor of Assessee Facts: 1. During the relevant year, the assessee has provided ITeS and Software Development Services (SWD) of INR 6...

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Transformation from Taxation of Business Income to Taxation of Business Transactions by CBDT

Equalization Levy Background of Equalization Levy:- Equalization Levy was introduced in India in 2016, with the intention of taxing the digital transactions i.e. the income accruing to foreign e-commerce companies from India. It is aimed at taxing business to business transactions. To bring in clarity in this regard, the government introd...

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Posted Under: Income Tax |

What is Domestic Transfer Pricing?

Applicability of transfer pricing provisions was earlier limited to International Transactions only. With effect from 01.04.2013, the scope of Transfer Pricing provisions is extended to 'Specified Domestic Transactions' and is accordingly applicable from A.Y. 2013-14....

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Posted Under: Income Tax |

Depreciation should be considered for evaluating operating results of comparables

AMD Research & Development Centre India Pvt. Ltd. Vs DCIT (ITAT Hyderabad)

AMD Research & Development Centre India Pvt. Ltd. Vs DCIT (ITAT Hyderabad) The method of depreciation adopted by the various comparable companies has an impact on the operating result of the respective comparable companies, which is highlighted in the above charts. The assessee company’s percentage of depreciation to total expenditu...

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No AMP expenditure of assessee lead to promotion of brands of its AEs

Pernod Ricard India Pvt. Ltd. Vs DCIT (ITAT Delhi)

AMP expenditure of assessee did not have a direct bearing on the promotion of brands of its AEs as the issue stood decided in favour of assessee by the decision of the Tribunal in assessee’s own case for the preceding assessment years i.e., A.Y. 2007-08 and 2008-09....

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Calculation of Arm’s Length Price-Section 92C of Income Tax Act, 1961

A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm's length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party...

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Posted Under: Income Tax |

Transfer Pricing: Identification of Tested Party, whether assessee or associated enterprise

Transfer pricing is the concept where a controlled transaction between two associated enterprises (AEs) is compared with an uncontrolled transaction under the similar circumstances in respect of price or margin. The process of transfer pricing is consist of two analysis i.e. Financial analysis and Economic analysis....

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Posted Under: Income Tax |

ITAT upheld determination of ALP as nil for duplicative services

DCIT Vs Teradata India Pvt. Ltd. (ITAT Delhi)

The issue under consideration is whether the TPO is correct in considering subvention fee in the BPO segment instead of distribution segment?...

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Final assessment order U/s 144C without issuing draft order is Void-ab-Initio

Nikon India Pvt. Ltd. Vs DCIT (ITAT Delhi)

Nikon India Pvt. Ltd. Vs DCIT (ITAT Delhi) The issue under consideration is whether the assessment will sustain even if the Assessing Officer ignoring the statutory provisions of section 144C, passed the Final assessment order without issuing draft assessment order to the assessee? In the present case, the Tribunal vide order dated 31.03....

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Section 10AA deduction eligible on voluntary transfer pricing adjustment

DCIT Vs EYBGS India Pvt. Ltd. (ITAT Bangalore)

The issue under consideration is whether the officer is correct in rejecting claim for deduction u/s 10AA of the Act on the amount of transfer pricing adjustment voluntarily made by the assessee?...

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Safe Harbour – The Income Tax Rules

Safe Harbour – What is means Safe harbour refers to a legal provision to reduce or eliminate liability in certain situations as long as certain conditions are met. In other words, it refers to the circumstances under which the Income Tax authorities shall accept the transfer price declared by the assessee and the same shall […]...

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Posted Under: Income Tax |

Selection of comparable can be challenged even if same clears filters

PCIT Vs Open Solutions Software Services Pvt. Ltd. (Delhi High Court)

Since none of the comparables had been excluded on the ground of high turnover alone, the test of functional similarity applied by the Tribunal was in consonance with the legal position and moreover, assessee could not be denied a chance to challenge the inclusion of a comparable merely for the reason that the selected comparable cleared ...

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Draft Guidance Note on Report U/s. 92E of Income Tax Act, 1961

Following is the Exposure Draft of the Guidance Note on Report under section 92E of the Income-tax Act, 1961 (Transfer Pricing), issued by the Committee on International Taxation of ICAI for comments. Changes have been made to the extent of amendments made by the Finance Act, 2017....

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Posted Under: Income Tax |

Secondary Adjustment: An exploration of path less traversed with a dash of GST

GST applicability on interest received/receivable/offered to tax in case of secondary adjustment – Income Tax Act, 1961 deems such adjustment as a loan.  It is pertinent to note that interest earned on loans or advances is exempted from GST under notification number 12/2017 dated 20.6.2017....

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Posted Under: Income Tax |

Interlinkage between Valuation and Transfer Pricing

We see that whenever there is any TP litigation in relation to valuation of assets or shares, following are the issues that are raised by the IRD while evaluating the valuation report:...

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Posted Under: Income Tax |

Specified Domestic Transaction- Penalty for Concealment of Income

The provisions of transfer pricing are designed to keep a check on the practice of reducing the tax liability by entering into transactions at prices higher/lower than market prices with one or more associated entity....

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Posted Under: Income Tax | ,

Transfer Pricing Audit Applicability in India

Article explains Section 92 of the Income Tax Act, 1961 related to Computation of income from international transaction having regard to arm’s length price,  Meaning of Associated Enterprise under section 92A, Meaning of international transaction under Section 92B, Audit under the Transfer Pricing under Section 92E and Report from ...

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Posted Under: Income Tax |

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