Transfer Pricing alerts - 2011Insight with information |
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| 2011 | |
| TP/38/2011 | “Principles of Natural Justice” – Taxpayer can cross examine the parties whose replies are sought to be used against the taxpayer |
| TP/37/2011 | Excess Earnings Method (‘EEM’), is an appropriate method to determine the arm’s length price of transaction of sale of Intangible Property and the method construes Comparable Uncontrolled Price (CUP) method. |
| TP/36/2011 | Tribunal ruling that the amount of compensation to be received ought to be a reflection of the functions performed, assets deployed and risks assumed by the associated enterprises (‘AE’) whilst discharging the business. On the concept of location savings the Tribunal held that the entire savings are passed on to customers, a part of it is retained by the AE, and the same should be factored in while determining the intercompany transfer price. |
| TP/35/2011 | Financial Guarantee – Beyond the rigor of transfer pricing provisions |
| TP/34/2011 | Actual receipt of services to be substantiated on payment for intra group services under cost contribution arrangement while a cost-benefit analysis is not pre-requisite for arriving at the arm’s length price |
| TP/33/2011 | Transfer Pricing Officer [TPO] should provide reasons for rejecting the Most Appropriate Method [MAM] used by the assessee before adopting a different MAM. While computing the gross profit margin using the Resale Price Method [RPM], purchases from Associates enterprises must not be considered. |
| TP/32/2011 | Hyderabad Tribunal rules that +/- 5% variation is not a standard deduction following the decision of the co-ordinate Bench in the case of ADP Private Ltd, to which one of the members was a party. |
| TP/31/2011 | Use of comparable prices obtained from custom authorities appropriate in computing ALP for import transactions |
| TP/30/2011 | Exact nature of services rendered by the taxpayer should be ascertained and comparable companies must be selected based on functional comparability. |
| TP/29/2011 | Pune Tribunal held that rule of consistency was required to be honoured by the revenue in cases where the facts are similar. Also held that the tax payer is entitled to perform economic adjustments in circumstances of under capacity utilisation of the company |
| TP/28/2011 | Tribunal assert internal comparability for determining Arm’s Length Price |
| TP/27/2011 | Delhi Tribunal held that any expenditure incurred by a captive subsidiary in India at the behest of its overseas Associated Enterprise [AE] to be reimbursed to the subsidiary. Parameters for comparability and any adjustments have been reiterated. |
| TP/26/2011 | Application of LIBOR rate for a specific currency is imperative in testing arm’s length interest on extended trade credit |
| TP/25/2011 | Comparability analysis cannot be confined merely to matching of FAR profiles; it is also necessary to consider other factors before selecting comparables. |
| TP/24/2011 | Tribunal clears the air on prospective use of amended second proviso to Section 92C(2) on +-5% safe harbour |
| TP/23/2011 | CUP method is not suitable to benchmark royalty payment in the absence of comparable uncontrolled transactions |
| TP/22/2011 | Taxpayer’s functional profile and place in the value chain can be a key determinant of the parameters of economic analysis |
| TP/21/2011 | The Tribunal rules on various contentious issues such as function/risk adjustment, use of contemporaneous and multiple year data, applicability of +/-5% variation. |
| TP/20/2011 | Arm’s length price under TNMM can be determined even with one comparable company |
| TP/19/2011 | Consistency required in selection of comparables: if loss-making companies are excluded then those earning super-normal profits should also be excluded. |
| TP/18/2011 | Comparables with lower turnover vis-à-vis taxpayer cannot be considered; only operating profits are to be considered. |
| TP/17/2011 | Bangalore ITAT rules on use of “multiple year data” and exclusion of non-operating income and expenses from computation of profit margin |
| TP/16/2011 | While applying TNMM, the computation of operating profit margin on costs should exclude items of income and expenditure that do not relate to relevant international transaction |
| TP/15/2011 | Mumbai Tribunal holds that segmental accounts should be considered for the computation of the PLI |
| TP/14/2011 | It is most appropriate to compare the intra-group transactions for a particular year against independent comparables having data for the same year, if available, where such comparables have already been accepted by the Department for a subsequent year |
| TP/13/2011 | Documents not available in public domain at the time of assessment and first appeal that are essential for determining arm’s length price can be admitted for consideration. |
| TP/12/2011 | The relevant market condition for testing a transaction under CUP is that of the market where the goods are sold and not the place of origin of the goods. |
| TP/11/2011 | Risk adjustments can be given only on company to company basis and not as a rule of thumb |
| TP/10/2011 | Incentive paid to the employees by the employer’s parent company pursuant to takeover does not require any mark-up |
| TP/09/2011 | Internal benchmarking analysis under TNMM based on segmental results prepared by using allocation keys is justified |
| TP/08/2011 | Delhi Tribunal holds that TP Documentation is required to be maintained contemporaneously on an annual basis |
| TP/07/2011 | Hyderabad Tribunal has ruled that only the expenses that have been incurred after the date of entering into agreement are liable for mark-up |
| TP/06/2011 | A continuing debit balance is not an “international transaction” |
| TP/05/2011 | The assessee is not entitled to adjustment of 5 per cent as stipulated u/s 92C(2), where only one of the several methods specified u/s 92C(1) is applied by the assessee to determine the arm’s length price |
| TP/04/2011 | Computation of gross profit margin should be based on audited accounts and should not be a notional figure. |
| TP/03/2011 | TPO cannot reject TP method adopted by assessee on the ground that the comparables are wrongly chosen. Further the ALP has to be determined with respect to an international transaction and not at an entity level. |
| TP/02/2011 | Pass- through costs that are incurred for non value- added purposes should not form part of the cost base while determining mark-up |
| TP/01/2011 | Purchase price of generic unpatented APIs from associated enterprises can be benchmarked against the price of same APIs sold by other independent producers despite difference in quality |
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