1. SERDIA PHARMA’S VERDICT TO IMPACT
OTHER PHARMA CO.S BATTLING
TRANSFER PRICING ISSUES
Transfer price is the price at which subsidiaries and divisions of a company transact
with each other. Several MNCs are dealing with tax demand in India as the tax office
believes that transactions did not happen at the arm’s length price (the price
between persons other than associated enterprises).
Serdia imported Active Pharmaceutical Ingredients (API) from its associated
enterprise and manufactured the final product in India & is accused of manipulating
import prices of generic drugs. The pharma company filed an appeal against an
Income-Tax Appellate Tribunal order (ITAT) by Pramod Kumar, an ITAT member and
an expert in international taxation. The officer found that Serdia India had imported
the API at 4.5 times the price than its competitor Torrent Pharmaceuticals.
The outcome of the appeal filed by Serdia Pharmaceutical, the Indian arm of French
pharmaceutical major Servier, before the Bombay High Court is crucial for companies
battling transfer pricing issues arising out of the cost of importing raw materials.
The decision in this case will clear the cloud over the transfer pricing adjustments to
be made with respect to import price for API. The high court will also clear out an
issue that whether the company has the right to decide on the most appropriate
method for arriving at Arms Length Price (ALP).
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