Development Consultants (P) Ltd. v. Dy. CIT

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The Tax Publishers2008 TaxPub(DT) 2427 (Kol-Trib) : (2008) 115 TTJ 0577 : (2008) 023 SOT 0455 : (2008) 006 DTR 0074 Development Consultants (P) Ltd. v. Dy. CIT INCOME TAX ACT, 1961 Transfer pricing - Computation of arms length price -Comparables Assessee had agreement with foreign associated enterprises (AE). *Held:* International transactions with associated enterprises should be determined on a transaction-by-transaction basis and not on an aggregate basis and in order to determine most appropriate method for calculation of arms length price (ALP), was selection of tested party, which should be least complex of controlled taxpayer and would not own valuable intangible property or unique assets that distinguish it from potential uncontrolled comparables. In computing ALP, gross margins comparison need to be with in associated enterprises and comparable uncontrolled transactions of unrelated enterprises entering into such transactions. Income Tax Act, 1961, Section 92 C A.Y.: 2003-04 and 2004-05 Decision: Matter remanded back to AO Case Law Analysis:Jt. CIT v. ITC Ltd. [2008] 112 ITD 57 (Kol.) (SB) (para 6) and Ranbaxy Laboratories Ltd. v. Addl. CIT [2008] 110 ITD 428 (Delhi) (para 17). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2008 TaxPub(DT) 2427 (Kol-Trib) : (2008) 115 TTJ 0577 : (2008) 023 SOT 0455 : (2008) 006 DTR 0074

Development Consultants (P) Ltd. v. Dy. CIT

INCOME TAX ACT, 1961

Transfer pricing - Computation of arms length price -Comparables

Assessee had agreement with foreign associated enterprises (AE). Held: International transactions with associated enterprises should be determined on a transaction-by-transaction basis and not on an aggregate basis and in order to determine most appropriate method for calculation of arms length price (ALP), was selection of tested party, which should be least complex of controlled taxpayer and would not own valuable intangible property or unique assets that distinguish it from potential uncontrolled comparables. In computing ALP, gross margins comparison need to be with in associated enterprises and comparable uncontrolled transactions of unrelated enterprises entering into such transactions.

Income Tax Act, 1961, Section 92 C

A.Y.: 2003-04 and 2004-05
Decision: Matter remanded back to AO

Case Law Analysis:Jt. CIT v. ITC Ltd. [2008] 112 ITD 57 (Kol.) (SB) (para 6) and Ranbaxy Laboratories Ltd. v. Addl. CIT [2008] 110 ITD 428 (Delhi) (para 17).