Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (7) TMI 806 - ITAT DELHINon-granting of tolerance band of +/(-) 5% from the arm’s length price (ALP) in accordance with the proviso to section 92C(2) - Held that:- After making certain adjustments to make it compatible with the international transaction, the adjusted price is taken as arm’s length price in respect of property transferred or services provided in the international transaction. Thus it can be noticed that what is determined under this method is the price. When we refer to plus minus 5% of the value determined under this method as per proviso to section 92C(2), it inevitably refers to the figure determined under this method, which is price and not profit embedded in the price. If an assessee has sold goods to its AE worth ₹ 100 and the ALP in respect of such goods sold under CUP method is say ₹ 103 or ₹ 98, then no adjustment is required because it is within 5% of ₹ 100, being the price at which goods were sold to associated enterprises in the international transaction. Irrespective of the fact whether the profit component in the sale value of ₹ 100 is ₹ 4 or ₹ 8 or ₹ 10, it is, in fact, the comparison of the price charged or paid for property transferred which is the subject matter of proviso to section 92C(2). Thus it can be seen that the plus minus 5% is required on the value of international transaction, being the purchase price in the instant case and not on the profit element in such transactions. We, therefore, direct that +-5% should be given effect in the calculation of the transfer pricing adjustment from the international transaction, if any. It is however, clarified, that this +-5% is not a standard deduction. This benefit is to be given only if the ALP falls within +-5% range of the price and not otherwise.
|