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
ITAT-Constitution of Benches »
 Income Tax Appellate Tribunal, Bangalore Benches, Bangalore List of Orders To Be Pronounced and SPS MPS Past Heard Cases Posted Before 'A' 'B'&'C' Benches on 25/05/2018
 Income Tax Appellate Tribunal, Ahmedabad Benches, Ahmedabad Constitution For The Period From 28-05-2018 To 31-05-2018 & 04-06-2018 To 08-06-2018
 Income Tax Appellate Tribunal : Mumbai Consolidated of orders ready for Pronouncement On 23/05/2018
 Income Tax Appellate Tribunal : Kolkata Benches : Kolkata Consolidated List Of Orders Ready For Pronouncement On 23/05/2018
 Income Tax Appellate Tribunal Pune Benches Pune Cause list for Bench "B"for the week ending 25/05/2018
 Income Tax Appellate Tribunal Bangalore Benches Bangalore Causelist For The Week From 21/05/2018 To 24/05/2018
 Income Tax Appellate Tribunal, Hyderabad Benches, Hyderabad. Cause List Of Cases Posted Before A-Bench (Db ) 21.05.2018 To 25.05.2018
 Income Tax Appellate Tribunal: Mumbai Benches : Mumbai Constitution of Kolkata Benches from 21/05/2018 To 25/05/2018
 Income Tax Appellate Tribunal: Kolkata Benches : Kolkata Constitution of Kolkata Benches from 21/05/2018 To 24/05/2018 (25 may 2018 M.A.Day )
 Income Tax Appellate Tribunal : Bangalore Benches : Bangalore Constitution for the week from 14/05/2018 To18/05/2018.
 Income Tax Appellate Tribunal : Kolkata Benches : Kolkata Consolidated List Of Orders Ready For Pronouncement On 16/05/2018.

Sandoz Private Limited vs. DCIT (ITAT Mumbai)
April, 09th 2013

Transfer Pricing: ALP should be determined on segment-wise profits & not at an entity level. Adjustment cannot be made to the entire entity turnover/ profits

 

The assessee entered into several international transactions with its AE and claimed that there were at arm’s length on the basis of a segment-wise TNMM analysis for each of them. The TPO rejected the claim on the ground that the segment-wise accounts were not audited. He adopted an entity method approach for purposes of determining the ALP. However, while rejecting the segmental analysis undertaken by the assessee, the TPO accepted 4 segments of the assessee’s operations and identified comparables. He arrived at different arithmetical means of appropriate profit level indicators by taking operating profit by cost of various identified comparables in each segment. He thereafter gave weighted average to the assessee’s percentage of turnover out of the total turnover and determined the weighted average of the arithmetic mean in each segments and arrived at the operating profit at 18.09% at entity level. This was taken as the arm’s length profit margin and as the assessee’s operating margin of 4.78% operating cost was less than the ALP so determined, an adjustment of Rs. 82 crore was made to the assessee’s income. Before the DRP, the assessee furnished audited segmental accounts though these were ignored by it. On appeal by the assessee to the Tribunal, HELD:

 

As the assessee’s operates in four different & independent segments and it submitted segmental accounts for each of its operation, the correct approach under TNMM should be to determine the ALP of each of the segments by comparing with the corresponding comparables involved in similar lines of functioning after proper FAR analysis. As the TPO had details of each segment-wise profit margin of the comparables, he ought to have compared the relevant profit margins with that of the assessee’s profit margins in each segment. His approach of taking the weighted average method of arriving at entity based profit margin is not correct. Also, his approach of making the adjustment on the entire turnover of the assessee including transactions with non-AEs instead of restricting it to the AEs’ transactions is not supported by the transfer pricing provisions. Further, in arriving at the segment-wise profit margin, the TPO should carry out an analysis of each company’s business activity, why they are selected as comparable and what are the functions of the company, operating margins, etc. He should adopt proper parameters/filters in respect of each segment. If the assessee opposes the selection of comparables by the TPO, it is the responsibility of the TPO to furnish necessary details. The onus cannot be shifted to the assessee when it is contending that proper data is not available in public domain in this regard.

 

 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Team

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