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2016 (1) TMI 451 - AT - Income TaxTransfer pricing adjustment - TPO take the amount of ALP at NIL - determination of Management Consultancy Fee - mark up computation - Held that:- What the TPO has missed is with reference the amounts other than foreign exchange loss. In the absence of any comparable figures and in the absence of any further enquiry and having the fact that services have been rendered to assessee as accepted by DRP also, TPO cannot take the amount of ALP at NIL, ignoring the payment by assessee of US$ 4,27,000. As per the agreement, all the costs incurred by the DQE Mauritius with 5% markup had to be charged to assessee. Therefore, as per the details furnished by assessee before the TPO, the actual management fee of US$ 4,27,000 with administration charges of US$ 14000 and markup of 5%, at the exchange value as on the date of 31-03-2008, can be considered as ‘service charges’ for the intra group services rendered. This can be taken as ALP. Therefore, modifying the order of TPO, we determine the Management Consultancy Fee as detailed above and AO is directed to modify the order accordingly. In arriving at the above, we have considered the OECD Transfer Pricing guidelines 2010, Chapter-VII pertaining to ‘special considerations for intra group services’. Considering the assessee’s agreement with DQE Mauritius which in turn has an agreement with DQ Entertainment Plc, and the reimbursement of cost from one company to another, we agree with the TPO’s observation that foreign exchange loss in financial transactions cannot be considered as ‘service charge’ for the intra group and therefore, we after considering the facts of the case, restrict the amount to the actual management fees charged by the DQE Mauritius along with other cost of administration and audit and mark up at 5%.
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