The Tax Publishers2020 TaxPub(DT) 1502 (Mum-Trib)

INCOME TAX ACT, 1961

Section 92C

TPO made ad hoc disallowance of 25% and held that 75% of Central Service Charges paid to AE was at arm's length. There was no basis for TPO to arrive at this conclusion when entire cost allocation sheet duly certified by an independent accountant was very much placed before him for his examination. In any case, TPO could not make any ad hoc disallowance while determining the ALP of international transaction. His duty was to determine ALP by following any of the five methods prescribed in section 92C read with rule 10B. Accordingly, action of TPO in accepting only 75% of the expenses to be at arm's length was not correct.

Transfer pricing - Determination of ALP - Central Service Charges paid to AE - TPO made ad hoc disallowance @ 25%

Assessee claimed deduction of Central Service Charges paid to AE abroad. TPO made ad hoc disallowance of 25% and held that 75% of said expenditure was at arm's length. Held: TPO had made ad hoc disallowance of 25% and held that 75% of the concerned expenditure was at arm's length. There was no basis for TPO to arrive at this conclusion when entire cost allocation sheet duly certified by an independent Accountant was very much placed before him for his examination. In any case, TPO could not make any ad hoc disallowance while determining the ALP of international transaction. His duty was to determine ALP by following any of the five methods prescribed in section 92C read with rule 10B. Accordingly, action of TPO in accepting only 75% of the expenses to be at arm's length was not correct.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 37(1)

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