Revenue loses latest Transfer Pricing case
There was a time when it took a couple of years for an ITAT order to be published. We in TIOL can proudly claim to have changed the scenario. Today, we are carrying a very important ITAT order delivered on 2nd of November, less than a week ago.
THE Transfer Pricing (TP) is a fast evolving law in India. And the Revenue has lost in the latest TP case decided by the ITAT President last Friday. While finding the additions made by the Revenue unsustainable, the Bench also observed that Arm's Length Price (ALP) does not mean maximum price or maximum profit in the range. A willing buyer in an open market shall pay minimum and not maximum price for goods or services. It is certainly not an exact science in which mathematical certainty is possible and some approximations cannot be ruled out.
In brief, the Tribunal held that the determination of the ALP is essentially an examination of a matrix of facts, and it can significantly vary even if all the comparable parametres are kept constant and just one parametre differs. Going by the fact that the Tribunal finally upheld the detailed analysis of the comparables done by the assessee, it can be safely inferred that the AO or the TPO cannot summarily reject such due diligence. Application of mind for every minor and major factor is required to do justice to the determination of ALP.
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