“tested party”

Transfer PricingSection 92CSection 92C615 judgments

The decision most relied on for tested party is ITO v. E Value Serve.com (75 Taxmann.com 195), cited in 60 judgments on BharatTax.

Leading authorities on tested party

ITO v. E Value Serve.com

75 Taxmann.com 195 · 2016 · Reported

citing judgments

In transfer pricing analysis, demanding daily balances for working capital adjustments is impractical and improper; adjustments should be based on opening and closing working capital. Transfer pricing inherently involves estimation to ensure comparability.

Ranbaxy Laboratories Ltd. v. ACIT

68 Taxmann.com 322 · 2016 · High Court

citing judgments

When benchmarking export transactions, the Associated Enterprise (AE) can be considered the tested party if it possesses the least complex functional analysis. The Assessing Officer's acceptance of a methodology in prior years can also support its use.

Capital IQ Information Systems India Pvt. Ltd. v. DCIT

32 Taxmann.com 21 · 2013 · ITAT

citing judgments

A change in depreciation policy impacts an entity's profitability, which is a key factor in assessing its suitability as a comparable company for transfer pricing analysis.

Skoda Auto India (P) Ltd. v. ACIT, Aurangabad

30 SOT 319 · 2009 · ITAT

citing judgments

The Tribunal may allow adjustments for differences between the tested party and comparable companies to eliminate material differences, provided accurate and credible evidence is furnished.

Development Consultants Pvt. Ltd. v. DCIT

115 TTJ 577 · 2008 · ITAT

citing judgments

The Arm's Length Price (ALP) must be determined on a transaction-by-transaction basis, and transactions should only be evaluated together if they are so closely linked or continuous that they cannot be adequately assessed separately. The 'tested party' for determining ALP should be the least complex entity.

Pr. CIT v. Aptara Technology (P.) Ltd.

92 Taxmann.com 240 · 2018 · High Court

citing judgments

A comparable company is not suitable if it has a significantly different business model, such as substantially higher outsourcing expenses as a percentage of operating costs, indicating a deviation from the tested party's operations.

Ranbaxy Laboratories Ltd. v. Additional Commissioner of Income-tax

110 ITD 428 · 2008 · ITAT

citing judgments

The tested party in a transfer pricing analysis should be the entity for which reliable comparable data is readily available and requires the fewest adjustments. This generally means selecting the party with the less complex functional analysis.

Smt. Raj Rani Devi Ramna v. CIT

201 ITR 1032 · 1993 · High Court

citing judgments

The transfer of property does not necessarily occur upon registration; the true test is the intention of the parties and whether there are any conditions precedent like payment of consideration or delivery of the deed.

Judgments citing tested party

Tarkett Flooring India Private Limited, Bengaluru vs. Assistant Commissioner of Income Tax, Circle-7(1)(1), Bangalore

In the result, the appeal is partly allowed

ITA 201/BANG/2021[2016-17]Status: DisposedITAT Bangalore21 Apr 2022AY 2016-17

Bench: Shri N. V. Vasudevan & Ms. Padmavathy Sit(Tp)A No.201/Bang/2021 Assessment Year : 2016-17 M/S. Tarkett Flooring India Pvt. Ltd., Acit, Vs. No.460, 2Nd Cross, Circle – 7(1)(1), Krishna Temple Road, Bengaluru. Binnamangala 1St Stage, Bengaluru-560 038. Pan : Aadct 9947 R Appellant Respondent

For Appellant: Shri. Sumeet Khuranna, CAFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 92Section 92C

types of inventory) 16. Making a working capital adjustment is an attempt to adjust for the differences in time value of money between the tested party and potential comparables, with an assumption that the difference should be reflected in profits. The underlying reasoning is that:  A company will need funding ... factors have to be kept in mind (i) The point in time at which the Receivables, Inventory and Payables should be compared between the tested party and the comparables, whether it should be the figures of receivables, inventory and payable at the year end or beginning of the year

Epson India Private Limited, Ulsoor vs. Deputy Commissioner of Income Tax, International Taxation, Circle-1(2), Bangalore

In the result, the appeal of the assessee is allowed

ITA 205/BANG/2021[2015-16]Status: DisposedITAT Bangalore18 Apr 2022AY 2015-16

Bench: Shri N V Vasudevan & Ms. Padmavathy S

For Appellant: Shri. Padam Chand Khincha, CAFor Respondent: Dr. Manjunath Karkihalli, CIT DR

Section 143Section 147Section 148Section 92Section 92(1)Section 92B(1)

consonance with Rule 10B(1)(e), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been

Australia and New Zealand Banking Group Ltd, Mumbai vs. DCIT 1(1)(2), Mumbai

In the result, appeal of the assessee is partly allowed

ITA 1106/MUM/2017[2012-13]Status: DisposedITAT Mumbai13 Apr 2022AY 2012-13

Section 143(3)Section 144C(5)

very very negligible due to reduced time span involved therein. Given these undisputed facts, it would be appropriate to consider assessee as the tested party as it would be the least complex entity and its profitability could be reliably ascertained. Admittedly, the transaction which requires to be benchmarked

Tata Consultancy Services Ltd, Mumbai vs. ACIT Large Tax Payer Unit-1, Mumbai

797/Mum/2018

ITA 1769/MUM/2018[2013-14]Status: DisposedITAT Mumbai11 Apr 2022AY 2013-14

Section 143(3)Section 2Section 2(43)Section 37Section 40Section 90

software, technical and consultancy services, the assessee in its Transfer Pricing Study Report (TPSR) had benchmarked the said transaction by selecting itself as a tested party by adopting Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM) with Operating Profit / Operating Cost (OP/OC) as the Profit Level Indicator ... used the same set of comparables as were used by him in assessee‟s own case for A.Y.2006-07 and considered the AEs as the tested party. The ld. TPO selected companies based in US and considered the same set of US companies as comparable to all other AEs operating

M/S.Tokai Rika Minda India Pvt. Ltd., Bangalore vs. Deputy Commissioner of Income Tax, Bangalore

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 2327/BANG/2016[2012-13]Status: DisposedITAT Bangalore08 Apr 2022AY 2012-13

Bench: Shri George George K, Jm & Ms.Padmavathy S, Am It(Tp)A No.2327/Bang/2016 : Asst.Year 2012-2013 M/S.Tokai Rika Minda India The Deputy Commissioner Of Private Limited Income-Tax, Circle 7(1)(1) V. Bangalore. Plot No.365, Sompura 1St Stage Kiadb Industrial Area Dobbaspet, Nelamangala Taluk Bangalore Rural Dist – 562 111. Pan : Aadct0271C. (Appellant) (Respondent) Appellant By : Sri.K.R.Vasudevan, Advocate Respondent By : Sri.Pradeep Kumar, Cit-Dr Date Of Pronouncement : 08.04.2022 Date Of Hearing : 22.03.2022

For Appellant: Sri.K.R.Vasudevan, AdvocateFor Respondent: Sri.Pradeep Kumar, CIT-DR

Section 143(3)

Assessee has therefore claimed economic adjustment towards Forex fluctuations.  The assessee has submitted that if the rates of depreciation are different between the tested party and the comparable companies, an adjustment has to be made for the same in the comparability analysis. In this regard, the assessee has relied ... No.2327/Bang/2016. M/s.Tokai Rika Minda India Private Limited. capacity utilisation adjustment on the ground that adjustment has to be computed on the tested party and not on the comparables. The Assessee relied on the decision in the case of Pact Closure Systems India Ltd IT(TP)A No 6801Bang/2017 (Bangalore) (order

Tata Consultancy Services Ltd, Mumbai vs. Asst CIT Ltu-1, Mumbai

In the result, appeal by the assessee is partly allowed for statistical purpose

ITA 1650/MUM/2016[2011-12]Status: DisposedITAT Mumbai06 Apr 2022AY 2011-12

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Porus Kaka, Sr. AdvocateFor Respondent: Ms. Vatsalaa Jha, CIT–DR

Section 115JSection 143(3)Section 144C(1)Section 144C(13)Section 144C(5)Section 2(43)Section 37Section 40Section 90Section 91

basis of mutual negotiation between the parties. Based on the functional analysis presented in the TP report, the assessee has selected itself as a tested party, Transactional Net Margin Method (―TNMM‖) as the most appropriate method with OP/OC as profit level indicator (―PLI‖) for benchmarking receipts from A.Es. for provision ... year should not be applied with net cost plus as the PLI. The TPO following approach adopted in earlier assessment years treated A.Es. as tested parties. The TPO further held that the cost incurred by the A.Es. on payment of transfer price to the assessee should not be taken into

Iss Facility Services India Private Limited, Mumbai vs. Assistant Commissioner of Income Tax 10(1)(2), Mumbai

In the result, appeal by the assessee is partly allowed in the terms of aforesaid

ITA 411/MUM/2018[2013-14]Status: DisposedITAT Mumbai01 Apr 2022AY 2013-14

Bench: Shri Vikas Awasthy & Shri M. Balaganeshआअसं.411/मुं/2018 ("न. व. 2013-14) Iss Facility Services India Private Limited The Qube, B 401/404 & A 402 Behind Taj Stats, Village Marol Sahar Road, Andheri (East) Mumbai – 400 059 ..... अपीलाथ" /Appellant Pan: Aabc13815M बनाम/Vs. The Assistant Commissioner Of Income Tax- 10(1)(2) Room No. 14, 20Th Floor, Air India Building, ..... ""तवाद"/Respondent Nariman Point, Mumbai – 400 021

For Appellant: Shri. M.P. Lohia with Shri. Nikhil TiwariFor Respondent: Shri Yogesh Kamat, CIT- DR

Section 143(3)Section 92C

Transactional Net Margin Method (‘TNMM’) as Most Appropriate Method (‘MAM’) by treating its associated enterprise (‘AE’), i.e. ISS World Services A/S, Denmark, as a tested party. The Assessee selected 8 comparable companies operating in European region providing management services similar to that provided by ISS World Services A/S to assessee ... margin of tested party was stated to be within the permissible range of three-year weighted average NCP margin of comparable companies and thus at arm’s length. 3.3 The Transfer Pricing Officer (‘TPO’) vide order dated 31.10.2016 passed under section 92CA(3) of the Act accepted benchmarking analysis conducted

M/S Tyco Fire & Security India Private Limited, Bangalore vs. Assistant Commissioner of Income Tax Circle-7(1)(1), Bangalore

In the result, the appeal filed by assessee stands partly allowed as indicated hereinabove

ITA 3363/BANG/2018[2014-15]Status: DisposedITAT Bangalore30 Mar 2022AY 2014-15

Bench: Shri. Chandra Poojari & Smt. Beena Pillaiit(Tp)A No. 3363/Bang/2018 Assessment Year : 2014-15 M/S. Tyco Fire & The Assistant Security India Pvt. Ltd., Commissioner Of D-601, Rmz Contennial, Income Tax, Kundalahalli Main Road, Circle – 7 (1)(1), Bangalore – 560 048. Vs. Bangalore. Pan: Aabct0087C Appellant Respondent Assessee By : Shri Rajan Vora, Ca : Shri Sumer Singh Meena, Cit Revenue By Dr (Osd) Date Of Hearing : 05-01-2022 Date Of Pronouncement : 30-03-2022 Order Per Beena Pillaipresent Appeal Has Been Filed By Assessee Against The Final Assessment Order Dated 26.10.2018 Passed By The Ld.Acit, Circle – 7(1)(1), Bangalore For Assessment Year 2014-15 On Following Grounds Of Appeal. “Based On The Facts & Circumstances Of The Case & In Law, Tyco Fire & Security India Private Limited (Hereinafter Referred To As "The Appellant"), Respectfully Craves Leave To Prefer An Appeal Against The Appeal Order Passed By The Learned Assessing Officer (Hereinafter Referred To As The "Learned Ao") Dated October 26, 2018 Under Section 143(3) Read With Section 144C Of The Income-Tax Act, 1961 ("The Act") Pursuant To The Directions Dated September 20, 2018 Issued By The Dispute Resolution Panel (Hereinafter Referred To As The "Drp") U/S 144C (5) Of The Act (`The Impugned Order') Inter-Alia On The Following Grounds: That On The Facts & Circumstances Of The Case & In Law:

For Appellant: Shri Rajan Vora, CA

Section 133(6)Section 143(3)Section 144C

lack of data, then in order to read the provisions of transfer pricing regulations in harmony, the adjustments should be made on the tested party. 25. The reliability and accuracy of adjustments would largely depend on availability of reliable and accurate data. For certain types of adjustments, relevant data ... reliably determinable based on information available in public domain, whereas, it may be possible to make equally reliable and accurate adjustments on the tested party (whose data would generally be easily accessible). In such a scenario, one has to resort to the provisions of Rule 10B(3)(ii) which provides

M/S Continental Automotive Components India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-2(1)(1), Bangalore

In the result, the appeal is partly allowed

ITA 129/BANG/2019[2014-15]Status: DisposedITAT Bangalore29 Mar 2022AY 2014-15

Bench: Shri N.V. Vasudevan & Shri B. R. Baskaranassessment Year :2014-15 M/S. Continental Automotive Vs. Dcit, Components India Pvt. Ltd., Circle – 2(1)(1), Plot No.53B, Bommasandra Industrial Bengaluru. Area, Hosur Road, Attibele Hobli, Anekal Taluk, Bengaluru–560 099. Pan : Aakcs 9578 C Appellant Respondent Assessee By : Shri. T. Suryanarayana, Senior Advocate Revenue By : Shri. Mudavathu Harish Chandra Naik, Cit(Dr)(Itat), Bengaluru. Date Of Hearing : 21.03.2022 Date Of Pronouncement : 29.03.2022 O R D E R

For Appellant: Shri. T. Suryanarayana, Senior AdvocateFor Respondent: Shri. Mudavathu Harish Chandra Naik, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 92

grant an adjustment for capacity underutilisation on the ground that the adjustment would have to be made to the comparable companies and not the tested party and that the capacity utilisation of each of the Continental Automotive Components India Pvt.Ltd. Page 17 of 97 comparable companies has not been considered ... made only to Continental Automotive Components India Pvt.Ltd. Page 18 of 97 the uncontrolled transaction, that is, comparable companies and not to the 'tested party' whose transaction is being compared. It was submitted that the adjustment can be made either in the case of the 'tested party' or the comparable

M/S. Capco Technologies Private Limited, Bengaluru vs. Deputy Commissioner of Income Tax, Circle- 2(1)(1), Bangalore

In the result, appeal of the assessee is partly allowed

ITA 2436/BANG/2019[2015-16]Status: DisposedITAT Bangalore28 Mar 2022AY 2015-16

For Appellant: Shri. Sandeep Huilgol, AdvocateFor Respondent: Shri. Mudavathu Harish Chandra Naik, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 144C(13)Section 92Section 92(1)Section 92B(1)

types of inventory) 16. Making a working capital adjustment is an attempt to adjust for the differences in time value of money between the tested party and potential comparables, with an assumption that the difference should be reflected in profits. The underlying reasoning is that: ♦ A company will need funding ... factors have to be kept in mind (i) The point in time at which the Receivables, Inventory and Payables should be compared between the tested party and the comparables, whether it should be the figures of receivables, inventory and payable at the year end or beginning of the year

M/S Brady Company India Private Limited, Bangalore vs. Income Tax Officer Ward-1(1)(4), Bangalore

In the result, ground 26 is allowed for statistical purposes

ITA 790/BANG/2019[2014-15]Status: DisposedITAT Bangalore22 Mar 2022AY 2014-15

Bench: Shri George George K, Jm & Ms.Padmavathy S, Am It(Tp)A No.103/Bang/2019 : Asst.Year 2014-2015 It(Tp)A No.790/Bang/2019 : Asst.Year 2014-2015 M/S.Brady Company India Private The Income Tax Officer Limited, No.26, Survey No.41 Ward 1(1)(4) V. Bengaluru. Konappana Agrahara Village Begur, Hobli, Electronci City, Phase-Ii, Bengaluru – 560 100. Pan : Aaccb8163A (Appellant) (Respondent) Appellant By : Sri.K.R.Vasudevan, Advocate Respondent By : Sri.Pradeep Kumar, Cit-Dr Date Of Pronouncement : 22.03.2022 Date Of Hearing : 07.03.2022 O R D E R Per George George K, Jm : These Appeals Are At The Instance Of The Assessee. The Relevant Assessment Year Is 2014-2015. 2. The Reason For Filing Two Appeals For Assessment Year 2014-2015 Is That Pursuant To The Dispute Resolution Panel’S (Drp) Directions (Directions Dated 28.09.2008), The A.O. Passed Final Assessment Order U/S 143(3) R.W.S. 144C Of The I.T.Act Dated 15.11.2018. In The Said Assessment Order, The Aggregate Transfer Pricing Adjustment Was Determined At Rs.14,43,51,081. An Appeal Has Been Filed Before The Tribunal Against The Order U/S 143(3) R.W.S. 144C Of The I.T.Act (Appeal No.It(Tp)A No.103/Bang/2019). Subsequently, On Application By The Assessee, The Drp Passed Rectification Order Dated

For Appellant: Sri.K.R.Vasudevan, AdvocateFor Respondent: Sri.Pradeep Kumar, CIT-DR

Section 143(3)Section 154

subsequent closure of Nokia business. The TPO has not allowed capacity utilization adjustment on the ground that adjustment has to be computed on the tested party and not on the comparables. The assessee relied on the order of ITAT in the case of IKA India Private Limited (supra) and submitted ... lack of data, then in order to read the provisions of transfer pricing regulations in harmony, the adjustments should be made on the tested party. In the following decisions it has been held that adjustment to the profit margins have to be made on account of underutilization of capacity

M/S Brady Company India Private Limited, Bangalore vs. Income Tax Officer Ward-1(1)(4), Bangalore

In the result, ground 26 is allowed for statistical purposes

ITA 103/BANG/2019[2014-15]Status: DisposedITAT Bangalore22 Mar 2022AY 2014-15

For Appellant: Sri.K.R.Vasudevan, AdvocateFor Respondent: Sri.Pradeep Kumar, CIT-DR

Section 143(3)Section 154

M/S Lenovo India Private Limited, Bangalore vs. Assistant Commissioner of Income Tax Circle-4(1)(1), Bangalore

In the result, the appeal filed by assessee stands allowed

ITA 2833/BANG/2017[2013-14]Status: DisposedITAT Bangalore21 Mar 2022AY 2013-14

For Appellant: Shri Padamchand Khincha, CA

Section 143(3)Section 144C(13)Section 92C

consonance with Rule 10B(1), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made ... illogical and improper to treat AMP expenses as a separate international transaction, for the simple reason that if the functions performed by the tested parties and the comparables match, with or without adjustments, AMP expenses are duly accounted for. It would be incongruous to Page

Walvoil Fluid Power India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-7(1)(2), Bangalore

In the result, appeal of the assesee is partly allowed

ITA 1901/BANG/2017[2013-14]Status: DisposedITAT Bangalore21 Mar 2022AY 2013-14

Bench: Shri George George K & Ms. Padmavathy S

For Appellant: Shri R.E Balasubramanyam, C.AFor Respondent: Shri A Sreenivasa Rao, CIT(DR)

Section 143(2)Section 143(3)Section 92C

relation to the international transaction [or the specified domestic transaction]; 20. Under TNMM, the net profit of a controlled transaction of an associated enterprise (tested party) is determined and this net profit is then compared to the net profit realized by comparable uncontrolled transactions of independent enterprises. As opposed ... also submitted that making a working capital adjustment is an attempt to adjust for the difference in time value of money between the tested party and potential comparables with an assumption that the IT(TP)A No.1901/Bang/2017 Page 14 of 28 difference should be reflected in profits

DCIT 3(3)(2), Mumbai vs. Sofdel Systems P..Ltd, Mumbai

In the result, appeal by the Revenue being ITA no

ITA 3618/MUM/2017[2010-11]Status: DisposedITAT Mumbai16 Mar 2022AY 2010-11

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Nitesh JoshiFor Respondent: Shri Tejinder Pal Singh

Section 143(3)Section 144C(1)Section 144C(13)Section 250Section 92C

no.3618/Mum./2017 ITA no.1838/Mum./2016 C.O. no.290/Mum./2017 4.2 In the transfer pricing study report, the assessee considered the US based A.E. as a tested party as it was performing simple functions and not owning any intangibles. The assessee adopted operating margin ratio (OP/TC) as profit level indicator and selected ... 92CA(3) of the Act rejected the transfer pricing analysis conducted by the assessee on the basis that the complete audit report of the tested party and comparables were not filed by the assessee and therefore data considered by the assessee was not reliable. The TPO conducted an independent search

Reliance Industries Ltd, Mumbai vs. Deputy Commissioner of Income Tax Large Taxpayer Unit-2, Mumbai

In the result, the ITA No

ITA 2876/MUM/2019[2015-16]Status: DisposedITAT Mumbai08 Mar 2022AY 2015-16

Section 143(3)Section 28

ITA Nos.1645 & 2876/Mum/2019 ITA Nos.2344 & 3945/Mum/2019 Assessment Years: 2014-15 & 2015-16 Page 1 of 105 INCOME TAX APPELLATE TRIBUNAL

DCIT (Ltu)-2, Mumbai vs. M/S Reliance Industries Ltd., Mumbai

In the result, the ITA No

ITA 2344/MUM/2019[2014-15]Status: DisposedITAT Mumbai08 Mar 2022AY 2014-15

Section 143(3)Section 28

ITA Nos.1645 & 2876/Mum/2019 ITA Nos.2344 & 3945/Mum/2019 Assessment Years: 2014-15 & 2015-16 Page 1 of 105 INCOME TAX APPELLATE TRIBUNAL

Reliance Industries Limited, Mumbai vs. ACIT, Mumbai

In the result, the ITA No

ITA 1645/MUM/2019[2014-15]Status: DisposedITAT Mumbai08 Mar 2022AY 2014-15

Section 143(3)Section 28

ITA Nos.1645 & 2876/Mum/2019 ITA Nos.2344 & 3945/Mum/2019 Assessment Years: 2014-15 & 2015-16 Page 1 of 105 INCOME TAX APPELLATE TRIBUNAL

Virgo Valves & Controls Ltd, Mumbai vs. DCIT 1(3), Mumbai

ITA 5617/MUM/2016[2009-10]Status: DisposedITAT Mumbai08 Mar 2022AY 2009-10

Section 143(3)Section 92C

income of the assessee is to be seen and considered and not effect on the cost or income of the AE. Therefore, the tested party is always the tax payer and not the AE. None of the factors under the Transfer Pricing Regulations require to consider whether the AEs would

Virgo Valves & Controls Ltd. (Now Virgo Valves & Controls Pvt. Ltd.), Mumbai vs. DCIT - 1(3), Mumbai

ITA 5337/MUM/2016[2008-09]Status: DisposedITAT Mumbai08 Mar 2022AY 2008-09

Section 143(3)Section 92C