INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Free of cost supply made to assessee by its AE, pursuant to distributorship agreement -

Assessee-company was engaged in business of software development services and unified data storage solutions. Its AE supplied products to assessee free of cost for sale in India and said transaction was not reported for TP purposes as receipt of products was free of cost and sales were to domestic parties. TPO alleged that even though cost price was 'Nil', product had a price and assessee should have been compensated by way of a suitable mark-up. TPO computed mark-up on operating cost of assessee to determine ALP and made additions. Held: As decided in assessee's own case, wherein it was held that recitals in concerned agreement, implied that intention of parties was clear that assessee would be a distributor of AE's products in India. TPO was directed to conduct fresh TP analysis by treating assessee's transaction as distribution agreement and by determining most appropriate method afresh. If after allowing necessary adjustments, loss declared by assessee was increased by such TP study, then no TP adjustment could be made as provided in section 92(3).

Followed:Comm Vault Systems (India) Pvt. Ltd. v. Dy. CIT 2018 TaxPub(DT) 2108 (Hyd-Trib).

REFERRED : Sony Ericsson Mobile Communications India Pvt. Ltd. (Now, Known as Sony India Limited) & Ors. v. CIT (2015) 374 ITR 118 (Del.) : 2015 TaxPub(DT) 1653 (Del-HC) and CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Del.) : 2012 TaxPub(DT) 2071 (Del-HC).

FAVOUR : Matter remanded.

A.Y. : 2012-13

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