Pharma major Ranbaxy Laboratories has said it will move the Delhi High Court against the Income Tax Appellate Tribunal's order which will subject the company's cross-border transactions to scrutiny by the Transfer Pricing Officer.
Contrary to reports that the ITAT had established under- assessment of income to the tune of Rs 224.5 crore during 2004-05, the issue relates to procedural aspects of assessment - whether the transactions have to be screened by the Transfer Pricing Offer or the Assessing Officer, Ranbaxy said.
Asked about the impact of the ITAT order, the company spokesperson said: "The appeal relates to the procedure to be followed by the Income Tax Department for determination of Transfer Pricing.
"The Income Tax Appellate Tribunal has upheld the Commissioner's view that following due procedure, the matter should have been referred by the Assessing Officer to the Transfer Pricing Officer. Ranbaxy is appealing this judgement in the Delhi High Court."
There would be "no additional tax demand for the assessment year 2004-05... therefore there is no impact on the current or future earnings of Ranbaxy," he clarified.
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.