INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Payment of corporate charges to AE - DRP having directed to allow 1% of total cost to assessee as ALP of corporate charges

Assessee claimed deduction of corporate charged of Rs. 2 crores paid by it to its AE abroad. TPO noticed found that this amount had been benchmarked by including it in the cost base while comparing arm's length margin using TNMM. He rejected TNMM method applied by assessee and separately benchmarked the said transaction allegedly applying CUP method. TPO further held that assessee had not received any economic and commercial benefits from such payment and of such international transaction had to be considered to be at nil. DRP took the view that bits and pieces of work might benefit the Indian assessee and there was no real way of quantification of such benefits. Accordingly, DRP directed the TPO to allow 1% of total cost to assessee. Assessee contended that if 1% of total cost of the assessee was taken then it would come to Rs. 8,88,38,40,653 which was higher than the amount of Rs. 2 crores paid by assessee towards corporate charges and then no adjustment on account of corporate charges would survive.Held: Since Revenue was not in appeal the direction of DRP had attained finality. and had to be given in letter and spirit. If found that after giving effect to DRP directions, total cost of assessee worked out to be higher than what had been paid by assessee towards corporate charges, no TP adjustment would be required.

REFERRED :

FAVOUR : Matter remanded.

A.Y. :

INCOME TAX ACT, 1961

Section 92C

SUBSCRIBE FOR FULL CONTENT