sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« News Headlines »
 New direct tax code may have to wait until 2019
 New direct tax code may have to wait until 2019
 New direct tax code may have to wait until 2019
 New direct tax code may have to wait until 2019
 How to use your Form 16
 Which ITR form applies to you for financial year 2017-18?
 Income tax returns filing form-2 released; should you use it? Find out
  Are you planning to file ITR 1 form? here's how to do it Income Tax Return (ITR) filing
 30 LPA-Opening Financial Controller
 ITR form 2 in java release by CBDT for return filing by individuals
 How to file your income tax return using ITR Form-1 Income Tax efiling for AY 2018-19

ITAT mathematics: Transfer pricing is no science
November, 06th 2007
The Income-Tax Appellate Tribunal has held that transfer pricing is not an exact science in which mathematical certainty is possible and some approximations cannot be ruled out. The case relates to transfer pricing of captive software development services rendered by an Indian subsidiary Mentor Graphics to its US-based overseas parent.

Mentor Graphics had carried out a detailed transfer pricing analysis and documentation choosing a set of comparables, which was rejected by the first level audit officer and the latters decision upheld by the commissioner (appeals). The tribunal, however, did not approve of the order of the transfer pricing officer and deleted the adjustment to the taxpayers income made by him, upholding the transfer price paid the taxpayer.

The primary issue in the case was the choice of appropriate comparables for benchmarking or comparing the profits of the Indian entity, in order to evaluate the adequacy of the transfer prices between the Indian entity and its overseas parent.

The tribunal contended that transfer pricing is not an exact science in which mathematical certainty is possible. It needs to be prima facie shown that the transaction was properly examined, comparable prices were objectively fixed, in a bona-fide, honest manner as required by law.

Transfer pricing provisions primarily require any income arising from an international transaction between two or more associated enterprises to be at arms length price and comparable to similar transactions between unrelated enterprises.

A proper study of all the specific characteristics of the transaction needs to be undertaken, including analysis of functions, assets and risks taking into account economically significant activities and responsibilities of the enterprises, it ruled, saying that a mere broad comparison was not sufficient enough.

This landmark ruling is a step in the right direction, as it focuses on economic issues and recognises commercial realities of businesses, which are the key in any transfer pricing analysis.
Further, the ruling gives a direction to transfer pricing officer that once taxpayers undertake appropriate due diligence, their analysis cannot be arbitrarily rejected during audits based on inferences and presumptions, said PwC executive director Shyamal Mukherjee.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Custom Software Development Outsourcing Custom Software Development Offshore Cus

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions