« Top Headlines » Open DEMAT Account in 24 hrs  ITAT Cuts ?4.85 Lakh Penalty After ?14.02 Lakh Interest Income Was Missed in ITR  ITR filed under old regime, tax calculated under new regime; Delhi ITAT gives taxpayer relief  ITAT Delhi Quashes Tax Notice on AMU PG Student’s ?18.34 Lakh Stipend, Declares It Tax-Free Under Section 10(16)  Advance tax deadline September 15: What happens if you missed the previous instalment payment?  How much gold jewellery can you keep at home? Nagpur ITAT explains rules on ownership, gifts, taxability  ?5.31 lakh TDS refund allowed by ITAT Delhi: Why absence of an original ITR did not block the taxpayer  Missed the ITR Filing Deadline? How to Claim Your Income Tax Refund and Correct Mistakes Before December 31, 2026  GST Return Preparation & ITC Analysis with TallyPrime (Hinglish Session)  GST Return Preparation & ITC Analysis with TallyPrime (Hinglish Session)  GST Return Preparation & ITC Analysis with TallyPrime (Hinglish Session)  Income-Tax Department Moves to Bring Greater Certainty to International Tax Cases «  Tax norms for foreign service providers still confusing... Tax-saving is a year-long business... » 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.