Landmark Cases on Transfer Pricing
367 decisions, ranked by how many judgments on BharatTax rely on them.
A company can be excluded from the list of comparables in transfer pricing, particularly if it possesses brand value or incurs significant selling and marketing expenses that impact its margins.
A company engaged solely in software services cannot be considered a valid comparable to a company earning income from both software products and services, particularly when the comparable has diverse activities and lacks segment reporting.
The addition made by the Transfer Pricing Officer (TPO) is deleted if the TPO fails to adopt one of the prescribed methods for determining the Arm's Length Price (ALP).
A company engaged in software development services is functionally not comparable to a 'product company' that provides software services and also sells software, especially when segmental details for the software development company are unavailable. Such a product company should therefore be excluded from the list of comparable companies in transfer pricing analysis.
Issuance of corporate guarantee by a taxpayer in favour of its associated enterprise is an international transaction covered under Section 92B of the Income Tax Act, 1961.
When assessing transfer pricing, factors such as huge turnovers compared to the tested entity, close group connections, payments for brand equity, and lack of segmental bifurcation between services are relevant considerations.
An agreement between unrelated parties for the sale of shares at a negotiated price, even if higher than the market price, should not be disregarded.
A company registered as a Category-1 merchant banking company with SEBI and engaged in merchant banking services cannot be a good comparable with a non-binding investment advisory service provider.
A company involved in software development, implementation, and other software services is considered functionally comparable to another company with a similar business profile for transfer pricing purposes.
A comparable company may be rejected if its primary income is from 'other sources' rather than service income, and it fails the service income filter.
A software development company with its own intangibles is not a good comparable for a contract service provider operating based on specific client instructions, due to functional differences.
The Arm's Length Price (ALP) must be determined on a transaction-by-transaction basis, and entity-level profits or common ALP for different activities cannot be determined. Segmental break-up information is necessary for comparable transactions.
An associate enterprise cannot be considered a comparable entity for transfer pricing adjustments as it lacks the independent nature of an uncontrolled transaction. The Comparable Uncontrolled Price (CUP) method requires comparing prices of products or services in uncontrolled transactions, not profit margins.
A company whose financial results are distorted due to events like amalgamation cannot be considered a comparable company for transfer pricing purposes. Such companies should be excluded from the comparable set.
The business model adopted by an assessee can meet the test of arm's length price determination under rule 10BA, and bonafide quotations can be covered under Rule 10AB.
A comparable company cannot be excluded from the set of comparable companies for transfer pricing purposes merely on the ground of merger or amalgamation, unless the resultant company is functionally different. The arguments based on high-end services in the ITES sector or high margins are not convincing grounds for exclusion.
A company with highly fluctuating profit margins due to a different revenue recognition model can be excluded from the list of comparables in transfer pricing analysis.
