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| The Tax Publishers2020 TaxPub(DT) 3123 (Mum-Trib) INCOME TAX ACT, 1961
Section 92C
As evident costs pertaining to the services obtained by assessee from third parties, viz., shippers/airliners, clearing and forwarding agents, transport service provider, etc., neither involved any service element of assessee nor assessee had carried any risk or employed any of its assets with respect to the same, therefore, inclusion of freight cost in total cost base of assessee by TPO was not permissible. Thus, TPO erred in adopting PLI of OP/TC as against OP/VAE adopted by assessee.
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Transfer pricing - Determination of ALP - Computation of PLI - OP/VAE v. OP/TC
Assessee's a logistics services provider and offring comprehensive portfolio of international, domestic and specialized freight handling services. Reported certain international transaction, including freight receipt and freight expenses. It adopted Operating Profit/Value Added Expenses (OP/VAE) as PLI. and thus showed transactions at arm's length. TPO adopted operating profit/turnover cost (OP/TC) as appropriate PLI for determining ALP and suggested addition of recovery of freight on inbound shipments of Rs. 486 crore and recovery of back to back third party charges of Rs. 115 crore.Held: As evident costs pertaining to the services obtained by assessee from third parties, viz., shippers/airliners, clearing and forwarding agents, transport service provider, etc., neither involved any service element of assessee nor assessee had carried any risk or employed any of its assets with respect to the same, therefore, inclusion of freight cost in total cost base of assessee by TPO was not permissible. Thus, TPO erred in rejecting PLI of OP/VAE.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
INCOME TAX ACT, 1961
Section 92C
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