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2011 (6) TMI 385 - AT - Income TaxTransfer pricing - ALP - transfer pricing adjustment made on provision of technical service and provisions of back office support services by the assessee to it's A.Es. - assessee adopted aggregation approach and submitted that operations (a) application research at BRDTC; (b) application of technical development services; and (c) promoting the licensing of technology. put together generated 13.13 per cent - TPO rejected the aggregation approach - Held that:- We do not understand as to how carrying on application research at BRDTC can be clubbed with, the activity of promoting the licensing of technology owned by the overseas group entity. We note that the A.E. reimbursed only the cost incurred by BRDTC on research. No mark-up is given. Not charging mark-up on application research at BRDTC, in our opinion, justifies transfer pricing adjustment in this case. No part of the income derived by the A.E. from the activity of application research at BRDTC is given to the assessee. The entire benefit of the activity are taken by the A.Es only. Whether the data of one year has to be taken or multiple year data has to be taken - Rule 10B(4) of the I.T. Rules, 1962 - Held that:- In the absence of the assessee specifically demonstrating that the data of the prior financial year reveals fact which influence the determination of the transfer price of the transactions being compared, the question of taking into consideration data other than the current year's data does not arise. Rejection of loss making comparables - Held that:- TPO has rightly rejected comparable of ADS Diagnostics Ltd. on the ground that comparison itself is flawed for the reason that enterprise level profits are taken for comparison. The actual margin of servicing segment has not been identified. The main income is from scanning. The function of the assessee is not akin to scanning. Further rejection of NMI (Asia) Ltd is also justified on ground that figures are abnormal and without explaining a huge fall in profits as compared to the fall in turnover. The reason for rejecting the two loss making units is not just because they were loss making units but for the reasons which are already stated in the preceding paragraphs. Grant of adjustments - working capital adjustment and risk adjustment while arriving at ALP - Held that:- Since assessee has not worked out the risk adjustment and as the Assessing Officer has already allowed 0.47 per cent as working capital adjustment, we are of the opinion that no further adjustment is necessary. Determination of ALP of back office support services - Held that:- Since margin of assessee falls within plus minus 5 per cent of arithmetic mean of comparable companies, hence, no adjustment is required - Decided partly in favor of assessee.
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