INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Computation of ALP - Expat support services reimbursement made by assessee whether duplicative in nature -

Assessee was an indirectly wholly owned subsidiary of Walmart Stores Inc., USA. It was engaged in providing various types of consultancy services and assistance to domestic Indian entities, i.e., Walmart India Private Limited and an unrelated entity Bharti Retail Limited. Expenses were paid by assessee to its AE on account of Expats salary which was utilised by assessee for providing services to the other parties and cost +10% mark-up was charged. It contended that AO/TPO was not justified in confirming addition on account of transfer pricing adjustment to income of assessee by holding that its international transaction relating to reimbursement of expenses ('Expat support services') was not at ALP and held its ALP at nil. Held: Tribunal in assessee's own case held that expat support reimbursement was not duplicative in nature since assessee earned income from its customers at a cost +10% after including cost of such services. It was further held that had the services been duplicative in nature than absolutely independent customer, i.e., Bharti Retail Ltd. would not have obliged to pay anything for such services. It was further held that same were also not shareholder services since assessee would not have availed the services from its associated enterprise then it would have had to hire similarly experienced personnel from external sources. Assessee was sole and absolute beneficiary of services. Thus, following decision of coordinate bench in assessee's own case for earlier years, subsequently when TPO himself deleted addition for subsequent year i.e. assessment year 2013-14 and for earlier years ,i.e., assessment years 2009-10 and 2010-11, TPO was directed to delete addition.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 14A

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