Dear Readers, We are pleased to present TransPrice Times for the first fortnight of June 2016. In this bulletin, OECD continues to propose key inputs and seeks to incorporate major issues and amendments relating to Action 8-10 (Transfer Pricing), Action 13 (CbC reporting) and Action 15 (Multilateral Instruments) of the BEPS Project. Further, some key issues in the Indian litigation revolving around use of multiple year data, attribution of profits and marketing intangibles are addressed. 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: 1st
– 15th
June 2016
Contact us: 607A, 7th
Floor, Ecstasy Commercial Complex, City of Joy, JSD Road, Mulund (W), Mumbai –
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Thomas Cook (India) Limited –
ITAT – Mumbai
Outcome: In favour of taxpayer
Category: AMP expenditure
Tax Court rules in favour of taxpayer in respect of
treatment of AMP expenditure and holds that it
cannot be an international transaction.
Accordingly, due to the absence of direct evidence
of incurrence of AMP expenditure for the benefit
of AE or on behalf of AE, transaction does not fall
within meaning of international transaction.
Reliance was placed on the stand taken by Delhi
High Court in various issues regarding AMP
expenses. Further, in the absence of any
agreement for sharing AMP expenses, Tax Court
maintains a clear-cut stand and deletes taxpayer’s
adjustment.
ZTE Corporation – ITAT – Delhi
Outcome: Against taxpayer
Category: Permanent Establishment (PE)
With regard to attribution of profit to PE the Tax
Court considers ‘economic life’ of PE in source
country to be a decisive factor.
Further, the level of operations carried out
through Indian PE are considerable enough to
conclude that entire sales function were carried
out by PE in India. Tax Court rejects taxpayer’s
stand and rules that if functions, assets and risks
assumed is not effectively followed in transfer
pricing analysis then further attribution of profits
to PE is required for such functions, risks.
Aptara Technologies Pvt Ltd –
ITAT – Pune
Outcome: Against taxpayer
Category: Multiple-year data
Tax Court rejects taxpayer’s views in regard of use
of multiple-year data in its transfer pricing analysis.
Accordingly, taxpayer is directed to use single year
data unless and until proven that the comparable
data retrieved under single year is not functionally
similar.
Recent News:
OECD seeks technical inputs on
Multilateral Instrument Standard
With regard to specific technical inputs, the
Organisation for Economic Cooperation and
Development (OECD) invites public comments
based on BEPS Action Plan 15 (Developing a
Multilateral Instrument to Modify Bilateral Tax
Treaties). The technical issues discussed relate to
development of multilateral instrument to modify
tax treaties and the optional provision on MAP
(Mutual Agreement Procedure) arbitration. The
aim is to enable taxpayers in applying multilateral
instruments to existing tax treaties.
China evaluates additional
disclosures on intra-group
services along with CbC -
reporting
China’s Consultation draft circular
‘Implementation Measures for Special Tax
Adjustments’ proposes new requirement for
preparation of Special File wherever taxpayer
engages in intra-group service transactions, cost
sharing agreements or with thin capitalisation.
Contents of the file include copies of relevant
intercompany agreements, documentation of
service cost identification and allocation keys,
selection of specific TP methods. In line with Action
Plan 13 of OECD’s BEPS Project, India and China
give emphasis to CbC reporting in high risk
assessments and challenge in collecting
information on global operations of a group
company headquartered elsewhere.
OECD adopts BEPS Actions 8-10 &
13 recommendations in Transfer
Pricing (TP) Guidelines
OECD includes amendments to TP-Guidelines
constituting participation of member countries as
well as non-member countries. Changes are likely
to align various chapters of BEPS.