Dear Readers, We are pleased to present TransPrice Times from 1 September- 15 October 2016 In this bulletin, some key issues in Indian litigation have been discussed with regard to royalties, aggregation approach corporate guarantees etc. Further, find what's new in the revised Income Computation and Disclosure Standard, that were notified recently. We hope you find this newsletter both timely and useful, and we look forward to your feedback and suggestions to improve it further. You can write to us at akshaykenkre@transprice.in Happy Reading!!!

1. TransPrice Times
Edition: 1 September- 15 October 2016
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Royal Canin India Pvt, Ltd– ITAT –
Mumbai
Outcome: In favour of taxpayer
Category: Associated Enterprise
Tax Court upholds that reimbursement of salary
and travelling expenses of an employee seconded
by the associated enterprise (AE) to the taxpayer
does not warrant transfer pricing adjustment.
A W Faber Castell (I) Pvt. Ltd –
ITAT – Mumbai
Outcome: In favour of taxpayer
Category: Royalty
Tax court accepts 3% royalty payment made by
assesse to its AE on grant of license and right to use
trademarks, considering Govt. approval for royalty
rate up to 8% on export and 5% on domestic sales
3i India Pvt. Ltd- ITAT- Mumbai
Outcome: In favour of taxpayer
Category: Segment vs. aggregation and APA
Tax court uphold that portfolio management
services are a part and parcel of investment
advisory services and hence no separate
benchmarking is required. Further, considers
subsequent Advance Pricing Agreement (APA) for
AY 2015-16 till 2019-20 where cost plus 21% mark
-up has been concluded and states that cost plus
20% model followed by the taxpayer is around the
similar range as agreed in the APA.
Tega Industries Ltd – ITAT –
Kolkata
Outcome: In favour of taxpayer
Category: Corporate Guarantee
The Tax Court holds that corporate guarantee
furnished by the taxpayer (an Indian company) to
ICICI bank for extending loan to subsidiary
company in the Bahamas (SPV) is a shareholder
function not warranting any TP addition for AY
2008-09.
Principles from various case laws
during this period
1. Dis- allowance of the same expenditure
once in transfer pricing and other as per
excess payment under Section 40A(2) is
not permitted. As the expenditure was in
the nature of international transaction,
the same would be governed by the
transfer pricing provisions and general
provisions would not be applicable
2. Tax Court uphold use of internal CUP as
most appropriate method for
benchmarking ‘designing and engineering’
service where such service is also provided
to independent parties
3. Tax Court deletes the adjustment of
notional interest considering the
receivable as capital financing transaction.
Also holds that TP officer should allow a
reasonable period of time against
outstanding receivables.
Revised Income Computation and
Disclosure Standards (ICDs)
Released- 29 September 2016
Important changes in the revised text of ICDS,
applicable from AY 2017-18 include:
 introduction of Standard costing in ICDS 2
relating to inventory valuation;
 pre-April 1, 2016 construction contracts
contract accounting now permissible as
per earlier method of accounting;
 concept of integral and non-integral
foreign operations removed from ICDS 6 -
effects of changes in foreign exchange
rates;
 A new sub-chapter introduced for
valuation of securities held by banks or
public financial institutions;
No changes in ICDS 1 (Accounting Policies), ICDS 7
(Government grants) and ICDS 10 (Provisions,
contingent liabilities and contingent assets)