HOT BUTTONS IN TRANSFER PRICING LITIGATION - IFA India · 2016-04-22 · CONTENTS INDIAN TRANSFER PRICING – STORY SO FAR CURRENT LITIGATION STATUS IN INDIA EFFECT OF FINANCE BILL

HOT BUTTONS IN TRANSFER PRICING LITIGATION

July 18, 2014

Statement of Credentials | 1Tax

CONTENTS

INDIAN TRANSFER PRICING – STORY

SO FARSO FAR

CURRENT LITIGATION STATUS IN INDIA

EFFECT OF FINANCE BILL 2014EFFECT OF FINANCE BILL 2014

TP CHALLENGES

Marketing intangibles

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Marketing intangiblesDeemed international transactionCategorization of tested partyJ i di ti TPO / AO

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inJurisdiction - TPO v/s AONon operating expensesSelection of tested party

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Hot buttons in transfer pricing litigation | 2| 2

Multiple year data & inter-quartile range

INDIAN TRANSFER PRICING – STORY SO FAR

- Empowered CBDT to formulate safe harbor

Clarification on coverage of the term “international

transactions” and expanding the scope of TPR to include

ifi d d ti

Introduction of TP regulations in India

formulate safe harbor rules.

- Constitution of DRP

specified domestic transactions. Provide advance pricing agreement framework

TP documentationAccountants report

20142009 2011 20122001 2007 2013

nary

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enta

tiveFinance Minister, in

Finance Bill 2014, has announced • Roll back option for

Amendment of the allowable

variation

Procedural amendments on

extension on time limit for completion

CBDT notified safe harbor

rules

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in• Roll back option for APA;

• Range system for determination of ALP

limit for completion of assessment

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Hot buttons in transfer pricing litigation | 3

CURRENT LITIGATION STATUS IN INDIANine rounds of transfer pricing audit completed in January 2014 and tenth round in progressAround 3,600 cases were taken up for transfer pricing assessment during FY2013-14 and additions and adjustments (estimated to be Rs 600 billion) have been made in

700800

2500

and additions and adjustments (estimated to be Rs 600 billion) have been made in half of themIncreased resources and training for tax officers

400500600700

1500

2000

2500

No of cases

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100200300400

500

1000 No of cases with TP adjustmentTP adjustment (INR in

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0100

0 Billions)

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All

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Source: *White paper on black money published by Ministry of Finance**Press Information Bureau - http://pib.nic.in/newsite/PrintRelease.aspx?relid=98973

TP Challenges

Marketing intangibles

Deemed international transaction

Characterization of tested party

Jurisdiction - TPO v/s AO

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Non operating expenses

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Selection of tested party

Multiple year data and inter-

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All

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Multiple year data and inter-quartile range

MARKETING INTANGIBLES

LG case significance and- LG case – significance and implications

- Discussion draft on transfer pricing aspects of intangibles

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aspects of intangibles

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MARKETING INTANGIBLES – BRIEF BACKGROUND

Foreign Holding CoBusiness Structure

Manufacturing & Distribution rightsBrand

Indian Subs Co Customer in India

g

Sale of goods

AMP E

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AMP Expenses

H AMPDisplay of

i h h

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inHeavy AMP expenses by

Indian subs Co

intent through advertisement

with foreign brand/logo

Marketing Intangible

All

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All

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LG CASE – SIGNIFICANCE AND IMPLICATIONS

Existence of

• No distinction between oral agreement and written/express agreement• Significantly high expenditure alone not a sign of marketing intangibles. Needs to be

coupled with intent and actual arrangementExistence of transaction

coupled with intent and actual arrangement

International transaction

Yes/No

• Presence of a transaction• Between two or more AEs, either or both to be non-residents• In the nature as referred to in Section 92B of the Income Tax Act, 1961• Brand building transaction to be considered as ‘provision of services’- Special Bench

nary

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Yes/No

• Bright Line – Accepted as a tool to identify value of marketing intangibles• Special provision (Sec 92) to prevail over general provisions (Sec 37(1), 40A(2))

N t f t b i l d d Ad ti t M k ti d P ti

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inValuation/MAM for

ALP

• Nature of expenses to be included – Advertisement, Marketing and Promotion• Subsidy to be reduced from initial amount• Application of appropriate mark-up on brand building services

All

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All

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KEY ISSUES AND CHALLENGES

Terms of agreement between Foreign Co

and Indian Co

Application of Bright Line concept for non-routine expenditure

Bifurcation of expenses among

selling expenses and AMPAMP expenses

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tiveSelection of the MAM

and appropriate comparables for

determination of ALP

Challenges faced by new entrants in the

market

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Characterization

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LG v/s BMW

BMW India was engaged in import and resale of certain models of cars, in addition, also carried out low level value added assemblingTPO made TP adjustment on account of incurring excessive AMP expenditure overTPO made TP adjustment on account of incurring excessive AMP expenditure over and above the comparable chosen, by applying Bright-line test.The Tribunal followed the SB Ruling and upheld the applicability of transfer pricing provisions in relation to marketing intangibles and the sanctity of bright line test to determine the cost of the transactiondetermine the cost of the transactionHowever, the Tribunal also held that no further compensation was required as the same has been received by way of premium profits earned by BMW IndiaBMW India sailed through the adjustment on account of creation of marketing intangibles since the marketing activity is part of the taxpayer’s distribution function

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intangibles, since the marketing activity is part of the taxpayer’s distribution function and any how it has been compensated by means of premium profits for any incidental brand building activity undertakenSB Ruling was binding only to the extent supported by facts involved in each case

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Transfer pricing is extremely fact specific and applicability of SB ruling to be looked at on a case to case basis

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Hot buttons in transfer pricing litigation| 10

DISCUSSION DRAFT ON TRANSFER PRICING ASPECTS OF INTANGIBLES-MARKETING AND DISTRIBUTION – CHAPTER VI - ANNEX EXAMPLES FROM 5-7

PrimairExample 5: Five-year royalty-

Example 5: Co S purchases watches with the R trademark and trade name from Primair (manufacturer and owner of the R name), takes title to and distributes the watches in Country Y and acts as a marketing agent, to execute Primair’s marketing plan under Primair’s directionfree, exclusive

marketing and distribution with option to renew; Co S receives a

Example 7: Five-year royalty-free, exclusive marketing

Example 6: Five-year royalty-free, exclusive marketing

directionThe compensation to Co S from reselling the watches and service fee for marketing activities is arm’s length. Primair retains all other income

Example 6: Co S develops and executes the marketing plan at its own receives a service fee reimbursement of marketing expenditure, plus profit

ve marketing and distribution with option to renew

ve marketing and distribution with option to renew

p p g pexpense and without extensive design and budget review by Primair

As a result of the greater risk to Co S, the price of watches is lowered and Co S earns greater profitSince Co S performs functions and bears risks under a long-term contract of exclusive distribution rights, it has the opportunity to benefit (or suffer a

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Country X

Country Y

pelement

of exclusive distribution rights, it has the opportunity to benefit (or suffer a loss) from the activities it undertakes. Therefore, no additional compensation is due, assuming third-party comparables support the level of functions and expenses incurred, and the return is arm’s length.

Example 7: Co S undertakes/ incurs increased functions/expenses

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Co. S

Sale

y Example 7: Co S undertakes/ incurs increased functions/expenses, but realizes profits significantly lower than those of potential comparables. Therefore, its margins on resale of R watches need to be supplemented.A TP adjustment is appropriate in the form of higher distribution profits (i d f d t i f t h ) h f fit b d

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Third-party customers

(ie, decrease of product price of watches) a share of profits based on relative contributions or direct compensation for the excess market expenditure, including a profit element.

DEEMED INTERNATIONAL TRANSACTIONTRANSACTION

- Swarnandhara IJMII Integrated Township Development Company Pvt ltd – Hyderabad Tribunal

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y- Bharti Airtel Limited – Delhi Tribunal

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SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVELOPMENT COMPANY PRIVATE LIMITED HYDERABAD TRIBUNAL (1/2)( )

Facts of the case:IJM Group had a subsidiary in India –IJM (India) Infrastructure Limited (“IJM India”)

Transaction Flow

IJM Group (AE) India )IJM India entered into a joint venture with Andhra Pradesh Housing Board and formed Swarnandhra IJMII Integrated Township Development

Outside India

IndiaSubsidiary

Agreement entered into for project management Integrated Township Development

Company (“Swarndandhara”)IJM India rendered project management services to Swarndandhara pursuant to an agreement between IJM Group and

IJM (India) Infrastructure Ltd

Andhra Pradesh Housing Board

a age e tservices rendered by

subsidiary

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an agreement between IJM Group and Swarnandhara

Questions before the Tribunal:S dh IJMII I d

51% 49%

Joint Venture

Rendered project management

services

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inWhether transaction between IJM India and Swarnandhara fall within the purview of Section 92B(2)

Swarnandhra IJMII Integrated Township Development Company

All

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Relationship

Transaction flow

SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVELOPMENT COMPANY PRIVATE LIMITED HYDERABAD TRIBUNAL (2/2)( )Ruling by the Tribunal:

Transaction between Swarnandhara and IJM India cannot be considered as deemed international transaction as both Swarnandhara and IJM India are residents for the tax purposeInterplay between Section 92B(2) and Section 92B(1)Interplay between Section 92B(2) and Section 92B(1)Section 92B(2) is an extension of Section 92A(1)Hence either or one of the party to the transactions has to be non-resident for the purpose of section 92B(2)A di l t ti b t t id t hi h h b i fl d b th i t dAccordingly, transactions between two residents which has been influenced by the associated enterprise of one cannot be considered as deemed international transaction for the purpose of Section 92B(2)

I t f th d t d d Fi Bill 2014

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Impact of the amendment proposed under Finance Bill, 2014The current Section 92B(2) provides that transaction by an enterprise with an unrelated party shall be deemed to be a “transaction” between two associated enterprises if there exist a prior agreement between the unrelated party and Associated Enterprise of the enterprise or where terms of relevant transaction are determined in substance between the unrelated party and AE

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intransaction are determined in substance between the unrelated party and AE.The ambiguity in the current section was whether or not the unrelated party has to be a non-resident for the transaction to be deemed international transactionThe Finance Bill 2014 has amended section 92B(2) to state that the residential status of the unrelated party is immaterial for determination of deemed international transaction

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party is immaterial for determination of deemed international transaction

BHARTI AIRTEL LIMITEDDELHI TRIBUNAL (1/2)( )

A i t d

Facts of the case:Bharti Airtel India issued corporate guarantee to Deutsche Bank for

Transaction Flow

Bharti Airtel India

Bharti LankaAssociated enterprises

gworking capital provided to its associated enterprise Bharti LankaBharti Airtel India considered the same as part of shareholder activity

Corporate Guarantee provided on

same as part of shareholder activity and hence consideration was considered to be nilWithout prejudice, Bharti Airtel determined the ALP to be 0 65

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provided on behalf of Bharti Lanka - free of cost

determined the ALP to be 0.65 percent of guarantee amount and made suo-moto adjustmentThe TPO re-determined the ALP at 2 68

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Deutsche Bank, New Delhi

Branch

Working Capital for Euro 3.6 Million

2.68 percent

All

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All

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BHARTI AIRTEL LIMITEDDELHI TRIBUNAL (2/2)( )Ruling by the Tribunal:

In order to attract the ALP adjustment, a transaction had to be an ‘international transaction’ under section 92B of the ActThe Explanation to section 92B inserted with retrospective effect from April 1 2002 was clarificatory inThe Explanation to section 92B, inserted with retrospective effect from April 1, 2002, was clarificatory in nature and hence did not alter the basic character of the definition of ‘international transaction’ under section 92BTherefore, this explanation must be read in conjunction with the main provisions embodied in section 92B9The international transactions in clauses (a), (b) and (d) of the explanation were already explicitly covered in section 92B(1)It was only the clauses (c) and (e) of the Explanation that were not explicitly covered, and thus fell under the residuary clause that covered “any other transaction having a bearing on profits, incomes, losses, or

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y y g g p , , ,assets of such enterprises”. Therefore, if a transaction had to be covered by clauses (c) and (e), the transactions had to be such as to have a bearing on profits, incomes, losses or assets of such enterpriseThe impact on profits, incomes, losses or assets could be immediate or in future [as contemplated in

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inclause (e)], but it could not be contingent or hypothetical – it had to be on a real basis. In the context of guarantee, a liability could arise for the guarantor if a default took place – however, this was a hypothetical situation and, based on this hypothesis, the guarantee could not be said to be an international transaction

All

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In the case of Bharti Airtel India, not only was there no current impact on the profits, incomes, losses or assets but Bharti Lanka had not availed the loan from the bank subsequently.

CHARECTERIZATION OFCHARECTERIZATION OF TESTED PARTY

- Maersk Global Centres (India) Private Limited - Mumbai Tribunal – Special Bench

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Bench

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MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED MUMBAI TRIBUNAL – SPECIAL BENCH (1/2)( )

Facts of the case:Taxpayer is engaged in providing IT/ ITeS to its AEsSelected TNMM for benchmarking with a particular set of comparablesSelected TNMM for benchmarking with a particular set of comparablesTPO rejected taxpayer’s TP analysis and selected his own comparablesOn appeal before DRP, a set of 10 comparables with an average margin of 28.04% was finalized – this included companies providing both high-end as well

l d ias low-end servicesIn appeal before SB, taxpayer’s objections essentially related to selection of comparables

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tiveQuestions before the SB:

Whether for benchmarking back office support services, companies performing KPO functions should be considered as comparable

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Whether companies earning abnormally high margins should be included in the list of comparable companies

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MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED MUMBAI TRIBUNAL – SPECIAL BENCH (2/2)( )SB Ruling on Question 1:

There exists a very thin line of difference between BPO and KPO servicesThe range of services rendered by the ITeS sector is so wide that a classification into low-end or high-end is not always possiblehigh end is not always possibleEvolution of BPO sector has given rise to KPOs; BPO trying to upgrade to KPO is likely to render both, BPO as well as KPO services in the process of evolution, thereby making classification difficultNot possible to create third category in between BPO and KPOIn the report on ITeS sector placed before the SB, KPO segment was referred to as a growing area,In the report on ITeS sector placed before the SB, KPO segment was referred to as a growing area, moving beyond simple voice suggesting thereby that only such services constituted low-end services of the BPO sectorFurther, the definition of ITeS as per Safe Harbor Rules includes data search integration and analysis services and clinical database management services

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Thus, SB concluded that ITeS services could not be further bifurcated into BPO or KPO services for comparability analysisHowever, having regard to functional profile of taxpayer, qualification of personnel employed by it, SB excluded high end companies from the comparables’ set

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inSB Ruling on Question 2:Companies satisfying comparability conditions could not be excluded merely on account of high margins; inclusion/ exclusion of comparables would depend on facts and circumstances of each caseAs per OECD guidelines, such situations should trigger further investigation to find out if the

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abnormal margins are on account of unusual factors or normal business conditions and accordingly such companies should be included/ excluded from the list of comparables


JURISDICTION - TPO V/S AO

- Cushman And Wakefield (India) Private Limited – Delhi High Court

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CUSHMAN AND WAKEFIELD (INDIA) PRIVATE LIMITED DELHI HIGHCOURT (1/3)( )Facts of the case:

Cushman and Wakefield (India) Private Limited (“CW India”) is engaged in rendering services connected to acquisition:

S l d l f l i i f d i jSale and lease of real estate; provision of advice, project management

International transactions of payment of referral fees and reimbursement of expenses to Associated Enterprises (“AEs”) were the subject matter of appeal and facts pertaining to both are as follows:

Reimbursement of expenses:CW India reimbursed certain expenses to its AE , Cushman & Wakefield Singapore (“CWS”) for providing liaison and co-ordination services to CW India’s client – IBMCW India also paid to Cushman & Wakefield Hong Kong (“CWHK”) for marketing

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CW India also paid to Cushman & Wakefield ,Hong Kong (“CWHK”) for marketing support servicesCW India did not benchmark the transaction of reimbursement of expenses and took cover under section 92(3) of the Act

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inThe TPO held that there were no intra-group services received and held the ALP to be nilITAT decided on two limbs:

That there is sufficient evidence in support of intra-group services received;

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That there is sufficient evidence in support of intra group services received;Held that the reimbursement of expenses has happened on a cost to cost basis and hence is cost effective

CUSHMAN AND WAKEFIELD (INDIA) PRIVATE LIMITED DELHI HIGH COURT (2/3)( )Payment of referral fees:

Held to be at arm’s length by the TPOAO disallowed the referral fees stating that no benefit was derived by the CW IndiaITAT held that once an international transaction was found to be at arm’s length, then the AO does not have jurisdiction to re-examine that transaction under normal provisionsAccepted the documentary evidenced produced by CW India in support of the p y p y pppayment of referral fee

Questions before the Delhi High court:Whether any services have been provided by CWS and CWHK

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Whether ITAT was right in holding that benchmarking was not necessary in respect of cost reimbursementWhether AO have jurisdiction u/s 37 to re-examine the transaction held to be at ALP by TPO

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y

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CUSHMAN AND WAKEFIELD (INDIA) PRIVATE LIMITED DELHI HIGH COURT (3/3)( )

Decision of Delhi High CourtReimbursement of expenses

Benchmarking of transaction pre requisite for checking applicability of sectionBenchmarking of transaction pre-requisite for checking applicability of section 92(3) of the Act For the purpose of determining whether section 92(3) of the Act could be applied, if was first necessary to determine the arm’s length price and then check whether th l d t d i t i id i I dithe same led to a decrease in tax incidence in India

Payment of referral feesJurisdiction of the AO and the TPO are distinctReference to the TPO is only for the limited purpose of determining the ALP

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Reference to the TPO is only for the limited purpose of determining the ALPAuthority of the TPO is to conduct a transfer pricing audit to determine the ALP and not to determine existence of a service from which the assessee benefitsTh i f f t l ifi ti i t i d b th AO / 37 f th A t

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inThe exercise of factual verification is retained by the AO u/s 37 of the ActTPO can determine the ALP at NIL if an independent entity in a comparable transaction would not pay any amountNeither the revenue nor the courts must question the commercial wisdom of the

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qassessee or replace its own assessment of the commercial viability of the transaction

NON OPERATING EXPENSES

- Honda Trading Corporation India Private Limited – Delhi Tribunal

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HONDA TRADING CORPORATION INDIA PRIVATE LIMITEDDELHI TRIBUNAL (1/2)( )

Facts of the case:Taxpayer undertook trading in a variety of products, such as steel and automobiles

Taxpayer had entered into various international transactions with its AE export ofTaxpayer had entered into various international transactions with its AE - export of parts and dies, receipt of commissions on imports, etc.

Taxpayer considered AE as the selected party and used the resale price method (‘RPM’) for the purpose of benchmarking the international transactions undertaken with AE

The TPO rejected the use of RPM and applied transactional net margin method (‘TNMM’) to the margin earned by Taxpayer at an entity level

Whil ti th tit l l i d b T th TPO id d

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While computing the entity level margin earned by Taxpayer, the TPO considered loss on account of foreign exchange as an operating expense

Question before the Tribunal:

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inQuestion before the Tribunal:Whether the TPO was right in considering loss on account of foreign exchange as an operating expense

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HONDA TRADING CORPORATION INDIA PRIVATE LIMITEDDELHI TRIBUNAL (2/2)( )Arguments of the taxpayer:

Abnormal variation in forex had resulted in increase in the import prices though the contracted sales price remained the sameAverage exchange rate of Thai Bhat during October 2005 to March 2006 was 100 Thai BhatAverage exchange rate of Thai Bhat during October 2005 to March 2006 was 100 Thai Bhat =INR 110. The prices were agreed after taking into account average exchange rateActual exchange rate at the time of purchases during April 2006 to September 2006 had increased to 100 Thai Bhat = INR 119Af l i f h f i h l i H d I di ’ iAfter exclusion of the foreign exchange loss as an operating expense, Honda India’s operating profit to sales ratio was 10.04 percent as opposed to 1.78 percent – margin of comparables selected by the TPO

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Ruling by the Tribunal:Details of the foreign comparables were sought to be submitted before the Tribunal by way of additional evidence – however, the Tribunal refused admission of additional evidence in absence of any exceptional circumstances which prevented the furnishing of such details

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y p p gduring the course of the transfer pricing audit proceedingsFluctuation in exchange rate being abnormally high, loss on account of such fluctuations was required to be excluded from computation of operating marginPost exclusion of foreign exchange loss as an operating expense, operating margin of Honda

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Post exclusion of foreign exchange loss as an operating expense, operating margin of Honda India being higher than the comparable companies identified by the TPO, transfer pricing adjustment was deleted

SELECTION OF TESTEDSELECTION OF TESTED PARTY

- General Motors India Private Limited –Ahmedabad Tribunal

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Ahmedabad Tribunal

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GENERAL MOTORS INDIAAHMEDABAD TRIBUNAL (1/2)( )Facts of the case:

The taxpayer was engaged in manufacture and trading of automobiles and ancillary partsThe AE of the taxpayer was engaged in designing and developing, research and development manufacturing and other ancillary activities in relation to CKD Kits anddevelopment, manufacturing and other ancillary activities in relation to CKD Kits and componentsThe AE employed routine tangible assets for manufacturing the said kits and componentsThe taxpayer purchased CKD Kits and ancillary parts from its AE.For the purpose of benchmarking the international transaction relating to purchase of CKD Kits and ancillary parts from AE, the taxpayer:

Selected the AE, being the lesser complex entity, as the tested party

Foreign comparable companies were considered

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Foreign comparable companies were considered

The TPO rejected the transfer pricing analysis undertaken by the tax payer and proceeded to consider the taxpayer as the tested party

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Question before the Tribunal:Whether the TPO was right in considering the taxpayer as the tested party

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GENERAL MOTORS INDIAAHMEDABAD TRIBUNAL (2/2)( )Ruling by the Tribunal:

Simpler entity to be considered as the tested partyThe United Nation’s Practical Manual on Transfer Pricing also advocated the use of the foreign AE as the tested party where the foreign AE was less complex and sufficient data on foreignAE as the tested party where the foreign AE was less complex and sufficient data on foreign comparables was furnished to the tax authorities – this view was endorsed by India as well The TPO had contradicted himself by considering the AE as the tested party for the purpose of benchmarking the royalty transaction as against considering the taxpayer as the tested party for the international transaction relating to purchase of CKDfor the international transaction relating to purchase of CKD Tests to ascertain selection of the least complex entity:

Functions performed – business activities undertakenAssets employed – routine or unique

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Availability of financial information of foreign comparablesAvailability of financial information of foreign AE

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MULTIPLE YEAR DATA & INTER-QUARTILE RANGE

- Finance Bill, 2014

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MULTIPLE YEAR DATA & INTER-QUARTILE RANGEFINANCE BILL, 2014 (1/2)

Finance Bill, 2014Current Legislation Proposed Legislation

Restricted use of multiple year data The Finance Minister in his speech has and the Revenue authorities insisted on use of data of the single year to which the transactions pertain. This has been the moot

f t f i i liti ti i I di

proposed to amend the provisions to allow use of multiple year data for comparability analysis. It is still uncertain how this proposal will be implemented in the amended Rules

cause of transfer pricing litigation in India

Arithmetic mean (as against the universal standard of interquartile range) was considered a measure of central

A range concept will be introduced. The current arithmetic mean concept will continue where the number of comparables is

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tendency for computing arm’s length price.

inadequate.

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A welcome move and expected to cut down the transfer pricing litigation

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EFFECT OF INTER-QUARTILE RANGE

At DRP levelWe consider the comparable companies selected by the DRP in the case of Lionbridge Technologies Private Limited Vs ITO-8(2)(2), Mumbai-21 (ITA

At ITAT levelTribunal ordered the TPO to remove the following companies from the list of comparable companies finalized by the DRP:( )( ) (

No.7498/Mum/2012)The comparable companies arithmetic mean arrived at by the DRP was 30.10 percent and that of assessee was 18.18 percentThe effect on inter quartile range on those comparable

companies finalized by the DRP:Acropetal Technologies Limited (Restored to the file of TPO for deciding afresh)Eclerx Services LimitedMold-Tek Technoligies Limited

The effect on inter-quartile range on those comparable companies are analyzed as under:

Particulars Percentage

Mean of comparable companies selected by the DRP

30.10

On removal of the above comparable companies the revised arithmetic mean and quartile is as under:

Particulars Percentage

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selected by the DRP

Mark-up earned by the Assessee 18.18

Inter quartile range 13.88 – 35.09

/ 5 percent 12 27 24 08

Mean of comparable companies (after giving effect to ITAT order)

21.14

Mark-up earned by the Assessee 18.18

Inter quartile range 10.67– 30.76

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relim

in

Had the Assessee had the benefit of inter-quartile range , the transfer price would have been at arm’s length as against the current scenario where the assesse does not fall within the +/ 5 percent range of

+/- 5 percent 12.27 – 24.08

The Assessee meets the arm’s length criteria under the inter-quartile method as well as the

q g

+/- 5 percent 12.27 – 24.08

All

righ

All

righ


assesse does not fall within the +/-5 percent range of the transfer price Accordingly, further litigation could have been avoided

qarithmetic mean method (after availing the benefit of +/-5 percent range)

nary

& T

enta

tive

hts

rese

rved

hts

rese

rved

| P

relim

in

C h a l e n g e U s

All

righ

All

righg

COMPUTATION OF QUARTILE

Comparable companies shortlisted by DRP FY 2007-08

Accentia Technologies Ltd 41 76

At DRP level At ITAT level

Comparable companies shortlisted by DRP FY 2007-08

Accentia Technologies Ltd. 41.76Acropetal Technologies Ltd. 35.30Aditya Birla Minac Worldwide 2.20Cosmic Global Ltd. 23.30Crosdomain solutions Ltd. 26.96

Accentia Technologies Ltd. 41.76Aditya Birla Minac Worldwide 2.20Cosmic Global Ltd. 23.30Crosdomain solutions Ltd. 26.96Datamatics Financial Services 34 87Crosdomain solutions Ltd. 26.96

Datamatics Financial Services 34.87e4e Healthcare 16.72Eclerx Services 65.88HCL Comnet Systems & Services Limited 32.90

Datamatics Financial Services 34.87e4e Healthcare 16.72HCL Comnet Systems & Services Limited 32.90Infosys BPO Ltd. 20.01Iservices India 9.58

nary

& T

enta

tive

Infosys BPO Ltd. 20.01Iservices India 9.58Mold-Tek 96.66R Systems International Limited 4.30Spanco Ltd 11 04

se ces d a 9 58R Systems International Limited 4.30Spanco Ltd. 11.04Wipro Ltd. 30.05Mean of the set before ITAT ruling 21.14

hts

rese

rved

hts

rese

rved

| P

relim

inSpanco Ltd. 11.04Wipro Ltd. 30.05Mean of the set before ITAT ruling 30.10Lower Quartile 13.88Upper Quartile 35.09

Lower Quartile 10.67Upper Quartile 30.76

All

righ

All

righ


pp

Source: Lionbridge Technologies Private Limited Vs ITO-8(2)(2), Mumbai-21 (ITA No.7498/Mum/2012)

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