Search Results For: Transfer Pricing


PCIT vs. Softbrands India P. Ltd (Karnataka High Court)

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DATE: June 25, 2018 (Date of pronouncement)
DATE: June 27, 2018 (Date of publication)
AY: 2006-07
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S. 260A: Entire law on when transfer pricing disputes constitute "substantial questions of law" for challenge in the High Court explained. Transfer Pricing Adjustments on the basis of the comparables are a matter of estimate of broad and fair guess-work of the Authorities based on relevant material. The exercise of fact finding or ‘Arm’s Length Price’ determination or ‘Transfer Pricing Adjustments’ should become final with a quietus at the hands of the final fact finding body, i.e. the Tribunal. The ITAT's findings of fact cannot be challenged in the High Court unless it is shown that the findings are ex-facie perverse and unsustainable and exhibit total non-application of mind by the Tribunal to the relevant facts of the case and evidence before it

This Court cannot be expected to undertake the exercise of comparison of the comparables itself which is essentially a fact finding exercise. Neither the sufficient Data nor factual informations nor any technical expertise is available with this Court to undertake any such fact finding exercise in the said appeals under Section 260-A of the Act. This Court is only concerned with the question of law and that too a substantial one, which has a well defined connotations as explained above and findings of facts arrived at by the Tribunal in these type of assessments like any other type of assessments in other regular assessment provisions of the Act, viz. Sections 143, 147 etc. are final and are binding on this Court. While dealing with these appeals under Section 260-A of the Act, we cannot disturb those findings of fact under Section 260-A of the Act, unless such findings are ex-facie perverse and unsustainable and exhibit a total nonapplication of mind by the Tribunal to the relevant facts of the case and evidence before the Tribunal.

Mehsana District Co-operative vs. DCIT (Gujarat High Court)

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DATE: March 6, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
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S. 92CB Transfer Pricing Safe Harbour Rules: If the assessee has exercised the safe harbour option under Rule 10THD(1) & the AO has not passed any order under rule 10THD(4) declaring the exercising of option to be invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not apply & the AO has no authority to make any reference to the TPO to ascertain the arm's length price of the assessee's specified domestic transactions. CBDT's circular dated 10.3.2006 could not have and does not lay down anything to the contrary

In the present case, admittedly, after the petitioner exercised such an option, the Assessing Officer passed no order under subrule (4) of rule 10THD declaring that the exercising of option was invalid. In terms of subrule (7) and subrule (8) of the said rule, therefore, the option exercised by the assessee would be treated as valid. Once this conclusion is reached, it follows as a natural and necessary corollary that the Transfer Pricing regime would not apply. That being the case, the Assessing Officer had no authority to make any reference to the TPO to ascertain the arm’s length price of the petitioner’s specified domestic transactions. Reference itself was therefore, invalid. CBDT’s circular dated 10.3.2006 could not have and does not lay down anything to the contrary. The circular merely prescribes the circumstances under which the Assessing Officer would make reference to the TPO. Nowhere does the circular provide that as soon as such circumstances exist, the Assessing Officer would make a reference to the TPO, irrespective of the fact that the assessee had opted for safe harbour and such option was treated or deemed to be treated as validly exercised. Legally speaking, CBDT could not have given any such directive. Eventually no such directive can be discerned from the circular.

Mitchell Drilling India Private Limited vs. DCIT (ITAT Delhi)

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DATE: April 11, 2018 (Date of pronouncement)
DATE: April 27, 2018 (Date of publication)
AY: 2006-07
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CITATION:
Transfer Pricing: The "international transaction" as defined in s. 92F(v) has to be a genuine transaction. Transfer pricing provisions do not apply to non-genuine or sham transactions

It is elementary that the ALP is determined of an `international transaction’, which has been defined in section 92B of the Act. The term `transaction’, for the purposes of the Chapter–X containing transfer pricing provisions, has been defined in clause (v) of section 92F to include an arrangement, understanding or action in concert. It shows that the ALP is always determined of an international transaction, which is genuine, but may be formal or in writing and whether or not intended to be enforceable by legal proceeding. If a transaction itself is not genuine, there can be no question of applying the transfer pricing provisions to it. In such an eventuality of a supposed genuine transaction turning out to be non-genuine, all the consequences which would have flowed for a real transaction, are reversed. In other words, certain deductions which would have been otherwise allowed in case of a genuine international transaction, are denied. Nitty-gritty of the matter is that only a declared and accepted genuine international transaction can be subjected to the transfer pricing regulations. If an international transaction is proved to be not genuine, the transfer pricing provisions are not triggered

Eaton Fluid Power Limited vs. ACIT (ITAT Pune)

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DATE: March 12, 2018 (Date of pronouncement)
DATE: April 23, 2018 (Date of publication)
AY: 2008-09
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Transfer Pricing: Entire law on whether the TPO can sit in judgement over the business model of the assessee and determine the ALP of the transactions with AEs at Nil explained in the context of judgements in Kodak India 288 CTR 46 (Bom), Lever India Exports 292 CTR 393 (Bom), Cushman and Wakefield 233 TAXMAN 250 (Del), R.A.K. Ceramics 293 CTR 361 (AP) & Delloite Consulting 137 ITD 21 (Mum)

Now, coming to the issue of transfer pricing adjustment made by TPO on account of services availed by the assessee from its associated enterprises and taking the value of said international transactions at Nil. In the first instance, we hold that TPO cannot sit in the judgment of business module of assessee and its intention to avail or not to avail any services from its associated enterprises. The role of TPO is to determine the arm’s length price of international transactions undertaken by the assessee and whether the same is at arm’s length price when compared with similar transactions undertaken by external entities or internal comparables

Calance Software Pvt. Ltd vs. DCIT (ITAT Delhi)

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DATE: March 23, 2018 (Date of pronouncement)
DATE: March 26, 2018 (Date of publication)
AY: 2006-07
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CITATION:
Transfer Pricing: CBDT's Instruction No. 3/2003 is binding on the AO. Consequently, the ALP of international transactions where the quantum is less than Rs. 5 crore has to be determined by the AO and cannot be referred to the TPO. If such reference is made, it is invalid and the extended time for completing the assessment is not available to the AO. The assessment is void as it is time-barred

At the time of hearing the Ld. AR has taken a ground which is on legal point that as per the Instruction No. 3/2003 issued by the CBDT, the Assessing Officer should have decided the issue of international transaction himself instead of referring it to Transfer Pricing Officer as the quantum of International Transaction is below the monetary limit of Rs.5 crore. Prima facie, it appears that the contention of the Ld. AR is supported by the Instruction No. 3/2003

Honda Motor Co. Ltd vs. ADIT (Supreme Court)

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DATE: March 14, 2018 (Date of pronouncement)
DATE: March 24, 2018 (Date of publication)
AY: -
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S. 148: The AO is not entitled to issue a reopening notice only on the basis that the foreign company has a permanent establishment (PE) in India if the transactions in respect of which it is alleged that there has been an escapement of income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm's length

In the judgment of this Court dated 24th October, 2017 in Assistant Director of Income Tax-I, New Delhi v. M/s. E-Funds IT Solution Inc., Civil Appeal NO.6082 of 2015 and connected matters, it has been held that once arm’s length principle has been satisfied, there can be no further profit attributable to a person even if it has a permanent establishment in India. Since the impugned notice for the reassessment is based only on the allegation that the appellant(s) has permanent establishment in India, the notice cannot be sustained once arm’s length price procedure has been followed

Approva Systems Pvt. Ltd vs. DCIT (ITAT Pune)

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DATE: March 12, 2018 (Date of pronouncement)
DATE: March 21, 2018 (Date of publication)
AY: 2011-12
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S. 10A/ 10B: The bar in s. 92CA(4) that the assessee is not entitled to s. 10A/ 10B deductions in respect of transfer pricing adjustments applies only where the adjustment is made by the AO/ TPO. If the assessee suo motu makes the adjustment and offers higher income, s. 10A/10B deduction cannot be denied. Also, as such notional income is not "export turnover", the condition in s. 10A/10B that foreign exchange must be brought to India does not apply (Deloitte Consulting (ITAT Mum) not followed as it is contrary to iGate Global (Kar HC))

There is no dispute in the minds of authorities below that it is profits of business. Such profit of business is neither export turnover nor the total turnover of assessee but is artificial income which needs to be taxed in the hands of assessee. Consequently, we hold that the said artificial income cannot be part of export turnover or total turnover though it will be part of profits of business. Simile which follows is that in the absence of it being offered as export turnover or total turnover, then there could not be any condition for getting foreign exchange to India. The assessee has computed the additional income by following the transfer pricing provisions and has offered the same to tax as its business profits. Once it has been so offered to tax, it forms part of profits of business and while computing the deduction under section 10A(4) of the Act, the said profits have to be taken into consideration and the deduction so computed

Pr CIT vs. Amphenol Interconnect India P. Ltd (Bombay High Court)

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DATE: March 7, 2018 (Date of pronouncement)
DATE: March 13, 2018 (Date of publication)
AY: 2006-07, 2007-08, 2009-09
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CITATION:
Transfer Pricing: The Comparable Uncontrolled Price (CUP) method is not the Most Appropriate Method for determining the Arm's Length Price (ALP) in respect of the transactions of (sales of goods and sales commission) with Associated Enterprises (AEs) if there are geographical differences, volume differences, timing differences, risk differences and functional differences. If it is not shown that the selection of TNMM as the Most Appropriate Method is perverse, the same cannot be challenged

The TPO has while stating that FAR analysis has to be carried out, does not indicate that it was carried out. On the contrary, we find that the Tribunal in the impugned order has done the necessary FAR analysis. This is so as it has compared the risk and functional differences involved in finished goods being sold to AEs as against those sold to third parties as we have enumerated above to come to the conclusion that the prices at which the finished goods sold to the third parties are not comparables to the prices at which the goods sold to the AEs inter alia on the FAR analysis. We note that the finished goods are customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences, came to a conclusion that the CUP method would not be the MAM to determine the ALP

Vodafone India Services Pvt Ltd vs. DCIT (ITAT Ahmedabad)

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DATE: January 23, 2018 (Date of pronouncement)
DATE: January 24, 2018 (Date of publication)
AY: 2012-13
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CITATION:
Transfer Pricing: Important law explained on whether termination of Option rights under an agreement can be treated as a "deemed international transaction" under section 92B(2) of the Act read with Rule 10B (4) in the light of the judgements in Vodafone's own cases of the Supreme Court (341 ITR 1) and the Bombay High Court (385 ITR 169).

When we interpose the aforesaid statutory definition in Section 92C(1), we find that the expression ‘international transaction’ means “an arrangement, understanding or action in concert etc between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other an arrangement, understanding or action in concert having a bearing on the profits, income, losses or assets of such enterprises ……..”. Therefore, in order to ascertain whether a particular transaction or not is an international transaction or not, the necessary preconditions which are to be satisfied are (a) that it is in the nature “an arrangement, understanding or action in concert etc”; (b) that it is between two or more associated enterprises, either or both of whom are non-residents; and (c) that it has a bearing on the profits, income, losses or assets of such enterprises

Halcrow Consulting India Pvt. Ltd vs. DCIT (ITAT Delhi)

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DATE: October 31, 2017 (Date of pronouncement)
DATE: January 11, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) Penalty: Under Explanation 7 to s. 271(1)(c), the onus on the assessee is only to show that the ALP is computed in accordance with the scheme of s. 92 C in good faith and due diligence. The fact that the TPO changes the method of computation of ALP does not mean it is a fit case for imposition of penalty if there is no dishonesty is found in the conduct of the assessee

The scheme of Explanation 7 to section 271(1)(c) of the Act makes it clear that the onus on the assessee is only to show that the ALP was computed by the assessee in accordance with the scheme of section 92 C of the Act in good faith and due diligence. It is not in dispute here that the ALP was computed in accordance with the scheme of section 92C inasmuch as Cost Plus Method was used. The TPO only substituted Cost Plus Method with TNMM and also computed the ALP of intra group services by taking the ALP as nil by applying the CUP Method. Whatever may be the merits in the action of the TPO changing the method of computation of ALP, the same cannot be a fit case for imposition of penalty inasmuch as it cannot be said that the ALP had not been computed by the assessee under the scheme of section 92C

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