Dear Members, Wish you all a very happy and joyful new year. Welcome to year 2017 !! We are pleased to present first TransPrice Times of year 2017 covering the second fortnight of December 2016. This periodical covers important rulings by Supreme Court and Tax Courts addressing key transfer pricing issues related to subvention, customized research, location savings etc. We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in Thank You and Happy Reading!! Kindly Click here on the link https://www.transprice.in/login.php for know your BEPS score in 10 steps

1. TransPrice Times
Edition: 16 – 31 December 2016
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Siemens Public Communications
Network Ltd – SC – Chennai
Outcome: In favour of taxpayer
Category: Subvention
Hon’ble Supreme Court rules subvention income
received by taxpayer from its parent company as a
capital receipt.
A subvention is a voluntary payment from parent
company, often to make good the losses incurred
by taxpayer. In this case, as subvention payment
was made to keep the capital investment of
taxpayer intact, the income is considered as capital
in nature, contrary to the ruling of Hon’ble High
Court in taxpayer’s case.
Hon’ble HC ruled subvention to be revenue in
nature, as subvention is not utilised by taxpayer for
setting up a business or creating a new asset. HC
placed reliance on its rulings in Ponni Sugars and
Sahney Steel where subsidies were received from
a public fund. Accordingly, Hon’ble SC pointed out
an incorrect reliance by HC as the voluntary
payment in the taxpayer’s case was a grant-in aid
by parent company, not from a public fund.
Accordingly, the Hon’ble SC reversed HC ruling to
suggest that any subvention received from parent
company will be treated as capital receipts and
upheld the taxpayer’s views.
McKinsey Knowledge Centre Pvt
Ltd – ITAT – Delhi
Outcome: Against taxpayer
Category: KPO vs BPO
Tax Court rejects claims of taxpayer and
characterises services provided by taxpayer as KPO
services.
Taxpayer carries out research using various
databases and further customises it before
exporting to its clients. Accordingly, in the
situation where taxpayer adds value to the data it
accesses from databases before exporting it, such
services shall not be considered as BPO services.
Therefore, Tax Court holds that services provided
under ‘Research and information’ segment of the
taxpayer as KPO services and cannot simply switch
back to argue that it is simply collecting data from
databases before sending to its group companies.
Syngenta India Ltd – ITAT –
Mumbai
Outcome: In favour of taxpayer
Category: Location savings
Tax Court deletes taxpayer’s tax adjustment with
respect to location savings and green
environmental cost savings.
Accordingly, separate adjustment for location
savings/ environmental costs is not justified as any
kind of return or location saving advantage would
have already been taken into consideration while
computing margins of local comparables. Further,
reliance is placed on OECD BEPS Guidance (Action
Plan 8) and Draft UN Transfer Pricing Manual,
where it is recognised that separate location
savings adjustment is not required if reliable local
market comparables are available.
Tax Court observes that adjustment is made by
considering economic factors of overseas AE and
comparing cost per employee globally with cost
per employee in India. Evaluating the above
method of applying adjustment as incorrect, Tax
Court proceeds to delete the adjustment and
provide relief to taxpayer.
Del Monte Foods India Pvt Ltd –
ITAT – Mumbai
Outcome: In favour of taxpayer
Category: Concealment Penalty
Tax Court removes concealment penalty imposed
on taxpayer on account of tax adjustments made.
Taxpayer submits that it does not execute orders
from ultimate consumer and followed a procedure
of routing all orders from its Singapore AE by
raising invoices on AE instead of final customer at
same price subject to differences in exchange rates
between date of purchases and date of actual
exports. Such exchange differences further
resulted in a shortfall in its arm’s length
computation.