Arbitration In IndiaArbitration intelligence VIA Transfer Pricing

December 12, 20170
Arbitration intelligence VIA Transfer Pricing
Hyundai Rotem Company (Appellant) v. ACIT (Respondent)
ITA No.510/Del./2016 dated 22/11/2017
FACTS
M/s. Hyundai Rotem Company, the taxpayer, paid an amount to DMRC out of the remittance received from the Head office.
But, Transfer Pricing Officer (TPO) had the view that Associated Enterprises (AE) reimbursed the taxpayer as a usual Head Office would support its Project office.
Further, he also held that  because the payment arose from taxpayer’s business in India so the transaction should form the part of the margin calculation.
ISSUE
 Whether the payment of arbitration award forms part of margin calculation to be added to revenue and cost for bench marking the international transaction?
VIEW OF PANEL
 In an order passed by DRP under Rule 13 of the Income-tax Rules, 2009, panel after carefully examining the matter found that the arbitration award was in respect of payment of customs and excise duty exemptions granted by the Government of India.
As per the panel if the liabilities of payment of custom duty and service tax are of project office, then the amount spent on payment of custom duties and service tax and thus also the expense on payment of arbitration award, will be part of cost base of the assesse for purpose of mark-up, if not then it would not be so included.
TPO was directed to follow consistent policy in respect of treatment of these reimbursement and the reimbursement of the arbitration award.
 ITAT DECISION
 ITAT agreed with the decision of the panel and directed TPO to follow the rule of consistency.
It held that payment on account of arbitration award cannot form part of the cost base for purpose of margin calculation.

Leave a Reply

Your email address will not be published. Required fields are marked *

© 2020-21 AMLEGALS Law Firm in Ahmedabad, Mumbai, Kolkata, New Delhi, Bengaluru for IBC, GST, Arbitration, Contract, Due Diligence, Corporate Laws, IPR, White Collar Crime, Litigation & Startup Advisory, Legal Advisory.

 

Disclaimer & Confirmation As per the rules of the Bar Council of India, law firms are not permitted to solicit work and advertise. By clicking on the “I AGREE” button below, user acknowledges the following:
    • there has been no advertisements, personal communication, solicitation, invitation or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
    • user wishes to gain more information about AMLEGALS and its attorneys for his/her own information and use;
  • the information about us is provided to the user on his/her specific request and any information obtained or materials downloaded from this website is completely at their own volition and any transmission, receipt or use of this site does not create any lawyer-client relationship; and that
  • We are not responsible for any reliance that a user places on such information and shall not be liable for any loss or damage caused due to any inaccuracy in or exclusion of any information, or its interpretation thereof.
However, the user is advised to confirm the veracity of the same from independent and expert sources.