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2016 (8) TMI 62 - AT - Income TaxTransfer pricing adjustment - intra group services - ALP adjustment - Held that:- In the light of the factual position coupled with the relief granted by the DRP on the ALP adjustment in the mark-up rate of the cost plus basis billing to the AE in respect of revenues for the IT enabled services, and in the light of the provisions of section 92(3), the transfer pricing provisions cannot be invoked in respect of intra group services, which admittedly form part of the cost base of the assessee, availed by the assessee. This is a case in which transfer pricing provisions cannot be applied because the application of ALP adjustment will indeed result in erosion of Indian tax base- as visualized by the scheme of Section 92(3) inasmuch for every rupee of ALP adjustment in intra group service, the revenue of the assessee, on the basis of application of arm’s length price, will stand reduced by one and one fifth times of the ALP adjustment. Section 92(3) does not permit computation of income on the basis of arm’s length price in such a situation; as a matter of fact, it prohibits application of arm’s length principle in such a situation. - Decided in favour of assessee.
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