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Ranbaxy to challenge ITAT order in transfer pricing case
February, 22nd 2008
Pharma major Ranbaxy Laboratories will move the Delhi High Court against the Income Tax Appellate Tribunal order relating to an under-assessment of income to the tune of Rs 224.5 crore in a transfer pricing case.

The ITAT while rejecting the contention of Ranbaxy maintained that the company had under-assessed its income by the said amount during 2004-05 by not pricing appropriately goods and services sold to sister concerns abroad.

"Ranbaxy is appealing this judgment in the Delhi High Court. No additional tax demand for the assessment year 2004-05 has been raised and therefore there is no impact on the current or future earnings of Ranbaxy", the company spokesperson said.

The bone of contention between Ranbaxy and the income tax department was the method adopted by the company for valuing the goods and services sold to 17 overseas associated enterprises (AEs), including joint ventures and wholly-owned subsidiaries in more than dozen countries including the US, the UK, Germany and China.

The transfer pricing regulations require that goods and services sold to associated enterprises should be valued at Arms' Length Price (ALP), a price which the company would charge from an unrelated entity.

Also, the companies are expected to adopt the most appropriate method prescribed by the Income Tax Act and the rules while assigning values to the goods sold to overseas AEs.

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