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The Mumbai Bench ‘L’ of the Income Tax Appellate Tribunal (the “Tribunal”), on 23 February 2011, pronounced its ruling in the case ACIT vs. M/s. NGC Network (India) Pvt. Ltd., Mumbai, ITA No. 5307/M/2008. The Taxpayer’s position under appeal filed by the Department with the Tribunal related to the use of independent comparables under TNMM for justifying the arm’s length nature since the same was accepted by the AO for a subsequent year. The AO argued that the comparables were not acceptable since they were different from functional and operational point of view. The Tribunal, ruled that the most appropriate comparison, under the facts and circumstances of the case, would be between the results achieved by the Taxpayer for the relevant assessment year and those earned by comparable uncontrolled entities during the corresponding period (provided such data is available for comparables), particularly where the set of comparable companies as well as the methodology have already been agreed to by the Department in the subsequent years.
Marubeni India Pvt. Ltd. v ACIT (I.T.A. No.919/Del/2009) (ITAT Delhi)- Interest income is to be excluded from operating revenue for computing the net profit from operating activity unless such interest income has nexus with the international transaction. Under the captive service and cost plus model, if an expense has a direct link with the international transaction, the same should form part of total cost i.e. operating costs. The onus is on the taxpayer to maintain robust documentation for availing necessary economic and risk adjustments. The option of +/- 5 % is available only to the taxpayer when he is computing the ALP and not when the AO/TPO is computing the ALP
The OECD guidelines are not of binding nature and even the Proviso to Rule 10B (4) provides that any subsequent year data cannot be considered. The contemporaneous data of relevant financial year is to be used for making the comparable analysis for arriving at the ALP unless it is proved otherwise
The Finance Bill, 2011 has introduced certain changes in the existing transfer pricing regime both in terms of substantive law and procedural aspects. Further, as part of a new anti-avoidance measure introduced in the Budget, the scope of TP legislation has been expanded to cover entities located in notified tax havens.
The Delhi bench of the Income Tax Appellate Tribunal (Tribunal) recently pronounced its ruling in the case of Airtech Private Limited (Appeal no. ITA 3591 Del )/2010) on documentation aspect of transfer pricing (TP). The Tribunal held that contemporaneous TP Documentation was to be maintained by the taxpayer annually as the transaction was separate and was influenced by changing market dynamics.
The Hyderabad Bench of the Income-Tax Appellate Tribunal [the Tribunal] has in the case of M/S Convergys Information Management (India) (F) Ltd. v. DCIT [ITA no. 299/Hl/2009] , held that in a cost plus arrangement expenses incurred post the date of entering into agreement has to be marked up, as no customer would pay mark up before entering into agreement.
In case the TPO/AO proposes to make adjustments to the income of the assessee by revising the arm’s length price computed by him, he needs to give a notice to the assessee, conveying the grounds on which the adjustment is proposed to be made, followed by an opportunity to reply to that notice and produce evidence to controvert the grounds, on which the adjustment is proposed.
The assessee is not entitled to adjustment of 5 per cent as stipulated u/s 92C(2), where only one of the several methods specified u/s 92C(1) is applied by the assessee to determine the arm’s length price
In principle, the CUP method (the traditional transaction method) is preferable to the other methods because all other things being equal, the CUP and traditional transactional methods lead to more reliable results vis-a-vis the results obtained by a
Delhi bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Adobe Systems India Private Limited v. ACIT [201 1-TII-13-ITAT-DEL-TP] (Date of Judgement: 21 January 2011; Assessment Year: 2006-07)held that supernormal profit making co
