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Transfer Pricing alers - 2012

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TP/29/2012 Under CUP method the ‘principle of aggregation’ should not apply unless there are valid reasons; price cannot be determined based on end use and, adjustment for differences in quantity is acceptable if supported by commercial and economic reasons.
TP/28/2012 Rate of guarantee commission depends on several factors such as terms and conditions of the loan, risk undertaken, economic and business interests; accordingly there cannot be an universal application of rate. Internal CUP can be applied after proper analysis.
TP/27/2012 CIT cannot revise aspects relating to transfer pricing in an assessment order which was passed in consonance with the TPO’s order u/s 92CA(4) of the Act
TP/26/2012 Sourcing support service provider does not create human and supply chain intangibles and can be remunerated on cost plus basis
TP/25/2012 Internal CUP to be based on simple average for determination of arm’s length price (‘ALP’) – Mumbai Tribunal
TP/24/2012 Assessing officer cannot simply apply Rule 10 of the Income Tax Rules, 1962 without pointing out errors in the taxpayer’s transfer pricing study Assessing officer cannot simply apply Rule 10 of the Income Tax Rules, 1962 without pointing out errors in the taxpayer’s transfer pricing study
TP/23/2012 Adjustment for under-utilisation of man-hours hired from Associated Enterprise allowable due to recession in software industry
TP/21/2012 Mumbai Tribunal reiterates the requirement of high standards of comparability analysis for application of the CUP method
TP/19a/2012 Summary of the Advance Pricing Agreement (APA) rules
TP/20/2012 Pune Tribunal allows economic adjustments on account of under capacity utilisation and start up cost and, also, for excess depreciation as assessee had charged depreciation at rates higher than the comparable companies.
TP/19/2012 A “controlled transaction” can not be taken as a comparable for determination of Arm's Length Price (ALP).
TP/18/2012 Safe Harbour Provisions to be Finalised soon
TP/17/2012 Pune Tribunal accepts use of Internal TNMM and External TNMM based upon the functions and economic aspects of the transactions sought to be compared
TP/16/2012 Hon’ble Mumbai High Court (HC) rules that the Income Tax Appellate Tribunal (ITAT) should rule on appropriateness of the existing material before remanding the matter back to the Assessing Officer (AO)
TP/15/2012 Transactional Net Margin Method based on internal comparable accepted.
TP/14/2012 Mumbai High Court held reopening of assessment based on “change in opinion” to be invalid.
TP/13/2012 “Principles of Natural Justice” – Procedure to be followed in case of information obtained under section 133(6)
TP/12/2012 Mumbai High Court rules that once the Arm’s Length Price (ALP) of royalty paid by the assessee, if justified under four corners of the law, the tax authorites cannot make Transfer Pricing adjustments on account of bad debts suffered by the assesee – Payment of royalty to Associated Enterprise (AE) and sale of products to customers are two separate transactions
TP/11/2012 Comparable companies to be selected on the basis of functional comparability. Reasonable adjustments are permissible for better comparability
TP/10/2012 Interest free loan granted is required to comply with arm’s length principle and domestic interest rates cannot be used as comparable to a foreign currency loan transaction
TP/09/2012 Arm’s length price determined under the Transfer Pricing regulations cannot be applied to compute “Ordinary Profits” to fetter profits eligible for claiming tax holiday.
TP/08/2012 Investment advisory services should not be compared with Merchant banking business and comparable selected by taxpayer cannot be rejected by tax authorities without providing cogent reasons
TP/07/2012 Payment of brand fees cannot be disallowed only on the grounds of continous losses
TP/06/2012 Intra group mergers or amalgamations exempted and simplification in procedure under the Combination Regulations
TP/05/2012 The Chennai Tribunal have held that penalty under section 271G of the Income-tax Act, 1961 [“the Act”] cannot be levied for benign reasons in the nature of procedural issues provided the taxpayer has maintained substantial documentation in support of its arm’s length price.
TP/04/2012 Robust FAR analysis and industry dynamics play a key role in substantiating Taxpayer’s position
TP/03/2012 TPO not bound to disclose the entire process followed for collection of information u/s 133(6); Taxpayer entitled to cross-examine the parties; TPO to take into consideration contemporaneous data that becomes available after the ‘specified date’
TP/02/2012 Adjustments to be restricted only to international transactions and TP adjustment cannot form the basis for rejecting the books of accounts of the taxpayer
TP/01/2012 Application of controlled transaction in specific circumstances has been upheld