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DATE: March 27, 2015 (Date of pronouncement)
DATE: April 6, 2015 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: Entire law on determining ALP of transaction of loan of money to AE discussed

The question whether the interest rate prevailing in India should be applied, for the lender was an Indian company/assessee, or the lending rate prevalent in the United States should be applied, for the borrower was a resident and an assessee of the said country must be answered by adopting and applying a commonsensical and pragmatic reasoning. We have no hesitation in holding that the interest rate should be the market determined interest rate applicable to the currency concerned in which the loan has to be repaid. Interest rates should not be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. Interest rates applicable to loans and deposits in the national currency of the borrower or the lender would vary and are dependent upon the fiscal policy of the Central bank, mandate of the Government and several other parameters. Interest rates payable on currency specific loans/ deposits are significantly universal and globally applicable. The currency in which the loan is to be re-paid normally determines the rate of return on the money lent, i.e. the rate of interest

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DATE: March 26, 2015 (Date of pronouncement)
DATE: April 6, 2015 (Date of publication)
AY: 2010-11
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CITATION:
Tranfer Pricing: While an adjustment for working capital investment is required, the transaction of sale of goods and receivables arising therefrom can be aggregated. If the differential impact of working capital has been factored in the pricing of the transaction of sale, no further adjustment can be made

Any separate adjustment on the pretext of outstanding receivables while accepting the comparables and transfer price of underlying transaction i.e. sale of goods by application of TNMM is unjustified. The differential impact of working capital of the assessee vis-a-vis its comparables has already been factored in the pricing/ profitability of the assessee and therefore, any further adjustment to the margins of the assessee on the pretext of outstanding receivables is unwarranted and wholly unjustified

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DATE: March 25, 2015 (Date of pronouncement)
DATE: March 27, 2015 (Date of publication)
AY: 2008-09
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(i) Growth mutual funds do not yield dividend and so s. 14A/ Rule 8D does not apply, (ii) S. 14A/Rule 8D disallowance for admin exp cannot exceed allocable exp debited to P&L A/c, (iii) ALP of funds lent to AE should be as per LIBOR, (iv) ALP of corporate guarantee to be at 0.5%

Growth mutual fund does not yield any dividend/exempt income, therefore, the provisions of section 14A would not apply on the investment in growth mutual funds

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DATE: March 25, 2015 (Date of pronouncement)
DATE: March 27, 2015 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: Share application money cannot be treated as loan amount merely because there is a delay in issuance of shares

For transfer pricing purposes, share application money cannot be treated as loan amount merely because there is a delay in issuance of shares by the subsidiary in the name of the assesse, which was duly explained by the assesse

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DATE: March 16, 2015 (Date of pronouncement)
DATE: March 16, 2015 (Date of publication)
AY: 2008-09
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CITATION:
Transfer Pricing: The “bright line test” has no statutory mandate and a broad-brush approach is not mandated or prescribed. Parameters specified in paragraph 17.4 of Special Bench verdict in L. G. Electronics are not binding on the assessee or the Revenue. Matter remanded to the Tribunal for de novo consideration because the legal standards or ratio accepted and applied by the Tribunal was erroneous

Parameters specified in paragraph 17.4 of the order dated 23rd January, 2013 in the case of L.G. Electronics India Pvt Ltd (supra) are not binding on the assesse or the Revenue. The “bright line test” has no statutory mandate and a broad-brush approach is not mandated or prescribed. We disagree with the Revenue and do not accept the overbearing and orotund submission that the exercise to separate “routine” and “non-routine” AMP or brand building exercise by applying “bright line test” of non-comparables should be sanctioned and in all cases, costs or compensation paid for AMP expenses would be “NIL”, or at best would mean the amount or compensation expressly paid for AMP expenses. It would be conspicuously wrong and incorrect to treat the segregated transactional value as “NIL” when in fact the two AEs had treated the international transactions as a package or a single one and contribution is attributed to the aggregate package. Unhesitatingly, we add that in a specific case this criteria and even zero attribution could be possible, but facts should so reveal and require. To this extent, we would disagree with the majority decision in L.G. Electronics India Pvt. Ltd. (supra). This would be necessary when the arm‘s length price of the controlled transaction cannot be adequately or reliably determined without segmentation of AMP expenses

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DATE: February 3, 2015 (Date of pronouncement)
DATE: February 13, 2015 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: Dept is not entitled to challenge the ITAT's decision to determine the interest rate ALP of funds advanced to AE as per Euribor if the earlier ITAT judgements relied upon by ITAT have not been challenged by the Dept

The Revenue has not preferred any appeal against the decision of the Tribunal in “VVF Ltd. Vs. DCIT” (supra) and “DCIT Vs. Tech Mahindra Ltd.”(supra) on the above issue. No reason has been shown to us as to why the Revenue seeks to take a different view in respect of the impugned order from that taken in “VVF Ltd. Vs. DCIT” (supra) and “DCIT Vs. Tech Mahindra Ltd.”(supra). The Revenue not having filed any appeal, has in fact accepted the decision of the Tribunal in “VVF Ltd. Vs. DCIT” (supra) and “DCIT Vs. Tech Mahindra Ltd.”(supra). In view of the above we see no reason to entertain the present appeal as in similar matters the Revenue has accepted the view of the Tribunal which has been relied upon by the impugned order

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DATE: February 4, 2015 (Date of pronouncement)
DATE: February 9, 2015 (Date of publication)
AY: 2010-11
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TPO/ DRP's action of reducing the quantum of royalty paid to AE by applying the "benefit test" is surprising and improper

It is an accepted principle of law that TPO has to determine the ALP by adopting any one of the methods prescribed u/s 92C of the Act. Mode and manner of computation of ALP under different methods have been laid down in rule 10B. Even, assuming that TPO has followed CUP method for determining ALP of royalty payment, as held by ld. DRP, it needs to be examined if it is strictly in compliance with statutory provisions. Rule 10B(1)(a) lays down the procedure for determining ALP under CUP method

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DATE: January 30, 2015 (Date of pronouncement)
DATE: February 2, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 92C: Transactions which are not closely linked cannot be aggregated for determining ALP. Cherry-picking is not allowed. If there are a number of comparable uncontrolled transactions, the average price has to be taken

The mandate of this section is to determine the ALP of ‘an’ international transaction. The term ‘transaction’ has been defined under rule 10A(d) to mean ‘a number of closely linked transactions’. It follows that the ALP of more than one transaction can be determined as one unit, only if they are closely linked transactions. In such a case, the plural of international transactions shall be considered as a singular for the purposes of benchmarking as a single transaction

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DATE: January 14, 2015 (Date of pronouncement)
DATE: January 22, 2015 (Date of publication)
AY: 2008-09
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CITATION:
While delay in recovery of debt from AE is an "international transaction", it is a part of the transaction of sale and its ALP has to be evaluated on an overall basis

After the insertion of explanation to section 92B(1), the payment or deferred payment or receivable or any debt arising during the course of business fall under the expression international transaction as per explanation. Therefore, in view of the expanded meaning of the international transaction as contemplated under clause (i) (e) of explanation to section 92B(1), the delay in realization of dues from the AE in comparison to non-AE would certainly falls in the ambit of international transaction. However, this transaction of allowing the credit period to AE on realization of sale proceeds is not an independent international transaction but it is a closely linked or continuous transaction along with sale transaction to the AE. The credit period allowed to the party depends upon various factors which also includes the price charged by the assessee from purchaser. Therefore, the credit period extended by the assessee to the AE cannot be examined independently but has to be considered along with the main international transaction being sale to the AE

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DATE: January 16, 2015 (Date of pronouncement)
DATE: January 21, 2015 (Date of publication)
AY: 2006-07
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CITATION:
(i) ALP of interest on loan granted to European AE has to be based on Euribor, (ii) If technical know-how is transferred by reserving certain rights, there is no "transfer" for s. 2(47) capital gains, (iii) interest u/s 244A is not taxable if withdrawn

Though, technical know-how is a capital asset, it does not necessarily follow that all receipts from exploitation of such asset are to be treated as capital receipts. Revenue receipts can also be generated by exploiting capital assets

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