Arm’s length principle

Transfer Pricing of Marketing Intangibles: An Analysis in light of LG Electronics India Pvt Ltd Case

I.  Introduction The taxation of income from intangibles is perhaps the most important large case issue in the inter-company transfer pricing world today.[1] An increasing number of multinational enterprises (hereinafter MNE™s) have been tapping the Indian market by offering their products through local affiliates. Due to strong market competition, they have substantially increased their advertising expenditure.… Read More

Tags: Arm's length principleDelhi High CourtIncome taxIncome Tax Act 1961IndiaMaruti SuzukiSuzukitransfer pricing

Clarifications regarding Circulars on Application of Profit Split Method

Clarification issued with Regard to Circulars on Application of Profit Split Method and on Conditions Relevant to Identify Development Centres Engaged in Contract R&D Services with Insignificant Risk; Circulars Were issued Earlier based on First Report of N Rangachary Committee on Taxation of Development Centres and IT Sector Chapter X of the Income-tax Act, 1961… Read More

Tags: Arm's length principleCBDTIncome Tax ActIndiaTaxTaxation in IndiaTransactional Net Margin Methodtransfer pricing

Transfer pricing provisions do not apply to investments in overseas share capital

CLR Editorial Notes: The assessee company M/s Vijay Electricals Ltd. is engaged in the business of manufacture and sale of distribution and power transformers and rural electrification projects on turn key basis. The assessee filed its return of income for the assessment year 2007-08 declaring  a total income of Rs. 20 Crore. The scrutiny assessment was  completed u/s… Read More

Tags: AppealArm's length principleCITEducational assessmentIndiatransfer pricing

Foreign Associate Enterprise cannot be the tested party & Transfer pricing can exceed overall group profits

CLR Editorial Notes: The Tribunal had to consider the following important transfer pricing issues in this case: (i) whether the foreign Associated Enterprise can be taken as as the tested party & if the sale price received by the foreign AEs from the services ultimately sold to customers is equal to that charged by the… Read More

Tags: Arm's length principleComparablesIndiatransfer pricing

“Comparability” & “tolerance band” adjustments u/s 92C – Important Principles Explained

CLR Editorial Notes: The Tribunal had to consider the following transfer pricing issues: (i) whether the use of multi-year data for determining ALP is permissible? (ii) Whether +/-5% adjustment is a standard deduction? (iii) Whether companies with minor differences can be treated as non-comparable? (iv) Whether a company with turnover 20 times that of the assessee can be said to be comparable?… Read More

Tags: Arm's length principleIndiatransfer pricing

ALP has to be the Arithmetic mean of all prices arrived through various methods

Ratio of the Case: If more than one price is determined by the most appropriate method, the ALP has to be the arithmetical mean of such prices CLR Editorial Notes: The assessee was engaged in providing software development support services by which it developed software upon the instructions of its parent associated enterprise (IKOS Systems Inc).… Read More

Tags: ALPArm's length principleITATOrganisation for Economic Co-operation and DevelopmentTPOTribunal

Transfer Pricing: Automatic RBI approval means transaction is at Arms Length Price

CLR Editorial Notes: The IT Appellate Tribunal had to consider two legal issues in the context of transfer pricing in this case. (i) whether a royalty agreement falls within the ˜automatic approval scheme™ and is approved or deemed to be approved by the RBI, and if so, whether the royalty can be treated to be at arms™… Read More

Tags: ALPArm's length principleIndiaProfit marginrbiRoyaltiesTaxation in Indiatransfer pricing

Arms Length Pricing – RBI Approvals are deemed irrelevant

Ratio of the Case: A Press note issued in relation to an FDI policy thus allowing payment of royalty amounting to a certain percentage of sales under automatic route, cannot be viewed as being done at Arms Length. The FDI policy which permits payment of a percentage of royalty is meant only for remittance of the royalty… Read More

Tags: ALPArm's length principleArms Length PricingCommonwealth Law ReportsFDIforeign direct investmentI T ActIndiaMinistry of Commerce & Industryrbi

Arms Length Pricing – Adjustment cannot be made to the entire entity turnover/ profits

Ratio of the Case: With relation to the Transfer Pricing regime, Arms Length Pricing should be determined on segment-wise profits & not at an entity level. In such a case, adjustments cannot be made to the entire entity turnover or profits. CLR Editorial Notes: The assessee had entered into several international transactions with its Associated… Read More

Tags: ALPArm's length principleCommonwealth Law ReportsTPOTransactional Net Margin Methodtransfer pricing

CUP & LIBOR most appropriate to determine ALP of Loan Transaction

CLR Editorial Notes: The case refers to a case of Transfer pricing on a loan transaction made by the assessee and the appellant in this case. The assessee was an Indian company which gave a loan of more than USD 1 Million to its USA based Associated Enterprise (AE) at a interest rate of 4%. The Transfer Pricing… Read More

Tags: ALPArm's length principleCitiBankCommonwealth Law ReportsIndiaLIBORPrime Lending RateTPOtransfer pricingUnited States

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