The document discusses a landmark Indian court ruling on the issue of transfer pricing adjustments made by tax authorities related to marketing intangibles. Specifically, the ruling addressed whether excessive advertising, marketing and promotional expenses incurred by Indian affiliates of multinational enterprises constituted an international transaction under Indian tax law. The court rejected arguments made by taxpayers and held that such expenses were international transactions. It also held that the transactional net margin method could be used to evaluate pricing when marketing and distribution functions are interrelated. The court provided clarity on several issues around marketing intangibles, but questions remain about applying its principles to licensed manufacturers.
Dear Members,
We are pleased to present to you ‘TransPrice Times – July 2018 edition’.
This periodical covers key court rulings on selection of different tested party; FAR analysis and Rule of consistency.
Apart from this, recent news relating to the draft e-commerce policy released by Government of India have been discussed in the periodical. Links to the OECD’s recent activity and our Special Edition article on ‘Changing Colours of Indian Tax Audit (3CD)’ have also been cited.
We trust you will find this update useful and informative.
We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in
Thank You and Happy Reading!!
The document discusses a recent ruling by the Delhi High Court relating to transfer pricing for an Indian procurement company.
1. The case involved an Indian company, Li Fung India Private Limited, that performed procurement functions for its overseas group entity. The tax authorities argued LFIL should be compensated based on a percentage of the overseas entity's export sales rather than just a cost plus markup.
2. The Delhi High Court ruled in favor of LFIL, stating its compensation must be calculated solely based on its own costs and functions performed, not costs of third parties or its overseas affiliate. The court said increasing LFIL's costs to include third parties would be an "arbitrary adjustment."
3. The ruling emphasized
TransPrice Times 1st - 15th August 2015Akshay KENKRE
Dear Readers,
We are pleased to present the first fortnight edition of TransPrice Times for August 2015.
The newsletter highlights important transfer pricing judgement that provides guidance on computation of capacity utilization adjustment and alerts including APA rollback scheme and MAP proceedings between India and US.
Trust you will find it useful.
Happy reading !!!
TransPrice Times 15 December 2015 - 12 January 2016Akshay KENKRE
Dear Readers,
Please find a link to the first edition of TransPrice Times for the new year 2016.
With the onset of holiday season, we saw some important judgement being pronounced by courts which are summarized in the alert.
Further, a long awaited guidance from the CBDT on the change in the residential status law which included the a global concept of 'Place of Effective Management' ('POEM') is also covered in the alert.
We hope you find this newsletter useful and look forward to your feedback and suggestions. You can write to us at akshaykenkre@transprice.in
Happy Reading!!!
The document summarizes India's Competition Act of 2002 and outlines its objectives to promote fair competition in the market. It discusses different anti-competitive practices like cartels and abuse of dominance that the Act prohibits. It also describes the roles and powers of the Competition Commission of India in regulating combinations, enforcing the Act through penalties, and advocating for competitive markets through non-enforcement measures.
Automotive Parts: The Industry's New Sweet SpotCognizant
For players in the automobile market, aftermarket parts and services is a valuable adjunct to car sales, but this sector is changing rapidly due to market conditions. We offer a schema based on willingness to pay for parts and for service to guide OEMs and other players in their spare parts and secondary market strategies.
Dear Members,
We are pleased to present to you ‘TransPrice Times – July 2018 edition’.
This periodical covers key court rulings on selection of different tested party; FAR analysis and Rule of consistency.
Apart from this, recent news relating to the draft e-commerce policy released by Government of India have been discussed in the periodical. Links to the OECD’s recent activity and our Special Edition article on ‘Changing Colours of Indian Tax Audit (3CD)’ have also been cited.
We trust you will find this update useful and informative.
We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in
Thank You and Happy Reading!!
The document discusses a recent ruling by the Delhi High Court relating to transfer pricing for an Indian procurement company.
1. The case involved an Indian company, Li Fung India Private Limited, that performed procurement functions for its overseas group entity. The tax authorities argued LFIL should be compensated based on a percentage of the overseas entity's export sales rather than just a cost plus markup.
2. The Delhi High Court ruled in favor of LFIL, stating its compensation must be calculated solely based on its own costs and functions performed, not costs of third parties or its overseas affiliate. The court said increasing LFIL's costs to include third parties would be an "arbitrary adjustment."
3. The ruling emphasized
TransPrice Times 1st - 15th August 2015Akshay KENKRE
Dear Readers,
We are pleased to present the first fortnight edition of TransPrice Times for August 2015.
The newsletter highlights important transfer pricing judgement that provides guidance on computation of capacity utilization adjustment and alerts including APA rollback scheme and MAP proceedings between India and US.
Trust you will find it useful.
Happy reading !!!
TransPrice Times 15 December 2015 - 12 January 2016Akshay KENKRE
Dear Readers,
Please find a link to the first edition of TransPrice Times for the new year 2016.
With the onset of holiday season, we saw some important judgement being pronounced by courts which are summarized in the alert.
Further, a long awaited guidance from the CBDT on the change in the residential status law which included the a global concept of 'Place of Effective Management' ('POEM') is also covered in the alert.
We hope you find this newsletter useful and look forward to your feedback and suggestions. You can write to us at akshaykenkre@transprice.in
Happy Reading!!!
The document summarizes India's Competition Act of 2002 and outlines its objectives to promote fair competition in the market. It discusses different anti-competitive practices like cartels and abuse of dominance that the Act prohibits. It also describes the roles and powers of the Competition Commission of India in regulating combinations, enforcing the Act through penalties, and advocating for competitive markets through non-enforcement measures.
Automotive Parts: The Industry's New Sweet SpotCognizant
For players in the automobile market, aftermarket parts and services is a valuable adjunct to car sales, but this sector is changing rapidly due to market conditions. We offer a schema based on willingness to pay for parts and for service to guide OEMs and other players in their spare parts and secondary market strategies.
The Competition Commission of India (CCI) adjudicates disputes involving allegations of abuse of dominance. Section 4 of the Competition Act prohibits abuse of a dominant position in the market. The CCI considers factors like imposing unfair conditions, limiting production, restricting market access, and leveraging dominance between markets. The CCI assesses dominance based on an enterprise's market share and impact on competitors and consumers in the properly defined relevant market. While dominance alone is not prohibited, the CCI has ruled that abuse of a dominant position violates the Competition Act.
This document provides an overview of competition law and policy in India. It outlines the objectives of the Competition Act of 2002, which are to promote economic efficiency and protect consumers from abuse of market power. The Act established the Competition Commission of India (CCI) to prevent anti-competitive practices. The CCI regulates anti-competitive agreements, abuse of dominant market positions, and mergers and acquisitions. It can impose penalties on firms that violate the Act. The Competition Act updated and replaced the older Monopolies and Restrictive Trade Practices Act to align Indian competition law with the country's post-1991 economic liberalization policies.
Competition refers to the rivalry between firms for customers and profits in a market. It benefits companies through efficiency and consumers through lower prices and more choices. The Competition Act 2002 aims to promote fair competition in India and prevent practices that limit competition such as price fixing. It established the Competition Commission of India (CCI) to enforce the act through penalties, orders to stop anti-competitive behavior, and separation of dominant companies. The CCI works to ensure freedom of trade and protect consumers and competition in Indian markets.
Competition is the best means of ensuring that the ‘Common Man’ or ‘Aam Aadmi’ has access to the broadest range of goods and services at the most competitive prices. With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers. A fair competition in market is essential to achieve this objective. Our goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers
A PRESENTATION ON COMPETITION ACT, 2002 WITH RECENT AMENDEMENTS. PRESENTED BY MADHUSUDAN NARAYA, STUDENT OF MBA AT NATIONAL INSTITUTE OF TECHNOLOGY, DUGAPUR, WEST BENGAL.
THIS TOPIC IS NECESSARY FOR MARKETING PEOPLE AND THE SLIDE CONTAINS THE CASES ALSO !!
The document discusses India's legal environment for business and competition law. It provides an overview of India's transition from a command economy to a more liberalized market, including the introduction of the Competition Act of 2002. The Act aims to promote fair competition in India and established the Competition Commission of India (CCI) to prevent anti-competitive practices. The CCI regulates mergers and acquisitions, abuse of dominance, and monitors anti-competitive agreements. It can impose penalties on firms found violating the Act.
Presentation on The competition act(2002)satya pal
The document summarizes the key aspects of the Competition Act of 2002 in India. It discusses the objectives of eliminating anti-competitive practices and promoting fair competition. The main features covered are the prohibition of anti-competitive agreements such as cartels, abuse of dominant market positions, and regulations governing mergers and acquisitions. Enforcement is carried out by the Competition Commission of India through investigations and imposition of penalties. The act aims to protect consumer welfare and ensure fair competition in the market.
The document discusses the importance of competition and the need for competition laws when global trade is taking place on a single platform. It notes that India enacted the Competition Act 2002 to establish a new competition regime and foster competition in markets after economic reforms in 1991 made the previous MRTP Act inadequate. The Act aims to eliminate anti-competitive practices and promote competition for the benefit of consumers.
The Competition Act of 2002 established the Competition Commission of India (CCI) to prevent anti-competitive practices and promote competition. The CCI is tasked with investigating anti-competitive agreements, abuse of dominant market positions, and mergers and acquisitions. Parties to a combination are not required to notify the CCI, but the CCI can investigate combinations on its own. The CCI faces challenges due to overlapping jurisdictions, unrealistic timelines, lack of cooperation from foreign counterparts, and limited resources and infrastructure.
Ppt on Competition Act, 2002 presented on 17th May 2015 at Chinmay Tutorials by CS Professional Students Abhishek Agarwal, Aditya Rana, Sakshi Gupta, Shreya Chaturvedi, Shipra Pareek
OLA was accused of abusing its dominant position and entering into anti-competitive agreements in the Delhi-NCR radio taxi market. Mega Cabs alleged that OLA used predatory pricing, discounts, and incentives to eliminate competition. However, the CCI ruled in favor of OLA, finding that OLA did not abuse its dominant position or enter into anti-competitive agreements in violation of the Competition Act.
The document discusses competition policy and law in India. It provides background on competition and benefits of competition for companies, consumers, and government. However, it notes that perfect competition is a myth. It outlines India's evolution of competition law from the MRTP Act to the current Competition Act, including provisions around unfair trade practices, restrictive trade practices, abuse of dominance, combinations, and intellectual property rights. It also presents some case studies on competition issues in mergers and acquisitions.
The document discusses the Monopolies and Restrictive Trade Practices Act (MRTP Act) of 1969 and the Competition Act of 2002 in India. The MRTP Act aimed to prevent concentration of economic power and prohibit anti-competitive practices. It was replaced by the Competition Act of 2002, which established the Competition Commission of India to prevent anti-competitive activities and promote fair competition for consumers and businesses. The key objectives of both acts were to ensure competition in the market and protect consumer interests.
Presentation on salient features and provisions of the Competition Act in India as a part of coursework
Course - MMS/MBA
Semester - 2
Subject - Business Laws
The document summarizes key aspects of the Competition Act of 2002 in India. It provides background on the history and purpose of replacing the earlier Monopolies and Restrictive Trade Practices Act of 1969. It outlines the duties of the Competition Commission of India in protecting competition and prohibiting anti-competitive practices. It defines important terms related to competition like agreement, enterprise, consumer, and prohibited practices like price fixing, bid rigging, exclusive dealing and predatory pricing.
MRTP Act 1969 and Competition Act 2002Chanda Singh
The document compares the MRTP Act of 1969 and the Competition Act of 2002 in India. The MRTP Act aimed to control monopolies and restrictive trade practices, while the Competition Act aims to promote competition and protect consumer interests. It established the Competition Commission of India to prevent anti-competitive conduct and regulate combinations. Some key differences are that the Competition Act explicitly defines anti-competitive offenses and regulates combinations, while the MRTP Act was more complex and reactive.
This document discusses why consumers should be interested in competition law. It explains that competition law aims to protect the competitive process, not competitors, by prohibiting anti-competitive practices. When firms compete through fair means like innovation and efficiency, it benefits consumers through lower prices, better quality and more choice. Competition law establishes a competition authority to investigate anti-competitive conduct like cartels, abuse of dominance, and anti-competitive mergers. Enforcement of competition law promotes consumer welfare.
Dominant Position :Competition Law(Competition Act,2002)Bibhu Manik
The Article deals with Definition,Abuse of Dominant Position,Dominant Factors in Relevant Market and its analysis with Recent Cases regarding Competition Act,2002
The document discusses competition and India's competition policy and law. It defines competition and explains its importance for consumers and economic growth. It outlines the objectives of India's competition policy to promote efficiency, innovation, and economic growth.
The key points are:
1. The Competition Act of 2002 established the Competition Commission of India to prevent anti-competitive practices and promote fair competition.
2. The Act prohibits anti-competitive agreements between enterprises, abuse of dominant market positions, and regulates combinations/mergers that reduce competition.
3. The goal of the competition policy is to preserve fair competition, promote efficiency, encourage innovation, and support sustained economic growth.
The document provides an overview of India's Competition Act of 2002. It discusses the objective of establishing the Competition Commission of India to promote fair competition and protect consumers. The Act prohibits anti-competitive agreements between companies and abuse of dominant market positions. It also regulates mergers and acquisitions. The Competition Commission of India enforces the Act and works to advocate for competition through non-enforcement measures like education programs. The Act has been amended over time to address challenges in its implementation and continue meeting India's evolving economic needs regarding fair competition.
News Update: Transfer Pricing- Marketing Intangible - Delhi High Court DecisionAkshay KENKRE
16 March 2015: Delhi High Court rules on applicability of transfer pricing on Marketing Intangibles. The ruling will bring in clarity on the aspect of Marketing Intangibles and would reduce litigation on the expenditure incurred on advertisement, marketing and promotion by the multinational companies. We present to you a snapshot of 142 pager decision given by the high court highlighting important principles around the issue and our views on the same.
Trust you will find it useful.
Happy reading !!!
Objectives & Agenda :
Transfer Pricing is one of the most litigious areas in Taxation. In this Webinar we shall look at some of the recent Judicial Precedents in Transfer Pricing Law with the aim of understanding the issues which arise and the views taken by the Authorities and the Court of Law. The Webinar discusses the facts of the case, issues and the Principles held by the Courts in each of these Decisions.
The Competition Commission of India (CCI) adjudicates disputes involving allegations of abuse of dominance. Section 4 of the Competition Act prohibits abuse of a dominant position in the market. The CCI considers factors like imposing unfair conditions, limiting production, restricting market access, and leveraging dominance between markets. The CCI assesses dominance based on an enterprise's market share and impact on competitors and consumers in the properly defined relevant market. While dominance alone is not prohibited, the CCI has ruled that abuse of a dominant position violates the Competition Act.
This document provides an overview of competition law and policy in India. It outlines the objectives of the Competition Act of 2002, which are to promote economic efficiency and protect consumers from abuse of market power. The Act established the Competition Commission of India (CCI) to prevent anti-competitive practices. The CCI regulates anti-competitive agreements, abuse of dominant market positions, and mergers and acquisitions. It can impose penalties on firms that violate the Act. The Competition Act updated and replaced the older Monopolies and Restrictive Trade Practices Act to align Indian competition law with the country's post-1991 economic liberalization policies.
Competition refers to the rivalry between firms for customers and profits in a market. It benefits companies through efficiency and consumers through lower prices and more choices. The Competition Act 2002 aims to promote fair competition in India and prevent practices that limit competition such as price fixing. It established the Competition Commission of India (CCI) to enforce the act through penalties, orders to stop anti-competitive behavior, and separation of dominant companies. The CCI works to ensure freedom of trade and protect consumers and competition in Indian markets.
Competition is the best means of ensuring that the ‘Common Man’ or ‘Aam Aadmi’ has access to the broadest range of goods and services at the most competitive prices. With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers. A fair competition in market is essential to achieve this objective. Our goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers
A PRESENTATION ON COMPETITION ACT, 2002 WITH RECENT AMENDEMENTS. PRESENTED BY MADHUSUDAN NARAYA, STUDENT OF MBA AT NATIONAL INSTITUTE OF TECHNOLOGY, DUGAPUR, WEST BENGAL.
THIS TOPIC IS NECESSARY FOR MARKETING PEOPLE AND THE SLIDE CONTAINS THE CASES ALSO !!
The document discusses India's legal environment for business and competition law. It provides an overview of India's transition from a command economy to a more liberalized market, including the introduction of the Competition Act of 2002. The Act aims to promote fair competition in India and established the Competition Commission of India (CCI) to prevent anti-competitive practices. The CCI regulates mergers and acquisitions, abuse of dominance, and monitors anti-competitive agreements. It can impose penalties on firms found violating the Act.
Presentation on The competition act(2002)satya pal
The document summarizes the key aspects of the Competition Act of 2002 in India. It discusses the objectives of eliminating anti-competitive practices and promoting fair competition. The main features covered are the prohibition of anti-competitive agreements such as cartels, abuse of dominant market positions, and regulations governing mergers and acquisitions. Enforcement is carried out by the Competition Commission of India through investigations and imposition of penalties. The act aims to protect consumer welfare and ensure fair competition in the market.
The document discusses the importance of competition and the need for competition laws when global trade is taking place on a single platform. It notes that India enacted the Competition Act 2002 to establish a new competition regime and foster competition in markets after economic reforms in 1991 made the previous MRTP Act inadequate. The Act aims to eliminate anti-competitive practices and promote competition for the benefit of consumers.
The Competition Act of 2002 established the Competition Commission of India (CCI) to prevent anti-competitive practices and promote competition. The CCI is tasked with investigating anti-competitive agreements, abuse of dominant market positions, and mergers and acquisitions. Parties to a combination are not required to notify the CCI, but the CCI can investigate combinations on its own. The CCI faces challenges due to overlapping jurisdictions, unrealistic timelines, lack of cooperation from foreign counterparts, and limited resources and infrastructure.
Ppt on Competition Act, 2002 presented on 17th May 2015 at Chinmay Tutorials by CS Professional Students Abhishek Agarwal, Aditya Rana, Sakshi Gupta, Shreya Chaturvedi, Shipra Pareek
OLA was accused of abusing its dominant position and entering into anti-competitive agreements in the Delhi-NCR radio taxi market. Mega Cabs alleged that OLA used predatory pricing, discounts, and incentives to eliminate competition. However, the CCI ruled in favor of OLA, finding that OLA did not abuse its dominant position or enter into anti-competitive agreements in violation of the Competition Act.
The document discusses competition policy and law in India. It provides background on competition and benefits of competition for companies, consumers, and government. However, it notes that perfect competition is a myth. It outlines India's evolution of competition law from the MRTP Act to the current Competition Act, including provisions around unfair trade practices, restrictive trade practices, abuse of dominance, combinations, and intellectual property rights. It also presents some case studies on competition issues in mergers and acquisitions.
The document discusses the Monopolies and Restrictive Trade Practices Act (MRTP Act) of 1969 and the Competition Act of 2002 in India. The MRTP Act aimed to prevent concentration of economic power and prohibit anti-competitive practices. It was replaced by the Competition Act of 2002, which established the Competition Commission of India to prevent anti-competitive activities and promote fair competition for consumers and businesses. The key objectives of both acts were to ensure competition in the market and protect consumer interests.
Presentation on salient features and provisions of the Competition Act in India as a part of coursework
Course - MMS/MBA
Semester - 2
Subject - Business Laws
The document summarizes key aspects of the Competition Act of 2002 in India. It provides background on the history and purpose of replacing the earlier Monopolies and Restrictive Trade Practices Act of 1969. It outlines the duties of the Competition Commission of India in protecting competition and prohibiting anti-competitive practices. It defines important terms related to competition like agreement, enterprise, consumer, and prohibited practices like price fixing, bid rigging, exclusive dealing and predatory pricing.
MRTP Act 1969 and Competition Act 2002Chanda Singh
The document compares the MRTP Act of 1969 and the Competition Act of 2002 in India. The MRTP Act aimed to control monopolies and restrictive trade practices, while the Competition Act aims to promote competition and protect consumer interests. It established the Competition Commission of India to prevent anti-competitive conduct and regulate combinations. Some key differences are that the Competition Act explicitly defines anti-competitive offenses and regulates combinations, while the MRTP Act was more complex and reactive.
This document discusses why consumers should be interested in competition law. It explains that competition law aims to protect the competitive process, not competitors, by prohibiting anti-competitive practices. When firms compete through fair means like innovation and efficiency, it benefits consumers through lower prices, better quality and more choice. Competition law establishes a competition authority to investigate anti-competitive conduct like cartels, abuse of dominance, and anti-competitive mergers. Enforcement of competition law promotes consumer welfare.
Dominant Position :Competition Law(Competition Act,2002)Bibhu Manik
The Article deals with Definition,Abuse of Dominant Position,Dominant Factors in Relevant Market and its analysis with Recent Cases regarding Competition Act,2002
The document discusses competition and India's competition policy and law. It defines competition and explains its importance for consumers and economic growth. It outlines the objectives of India's competition policy to promote efficiency, innovation, and economic growth.
The key points are:
1. The Competition Act of 2002 established the Competition Commission of India to prevent anti-competitive practices and promote fair competition.
2. The Act prohibits anti-competitive agreements between enterprises, abuse of dominant market positions, and regulates combinations/mergers that reduce competition.
3. The goal of the competition policy is to preserve fair competition, promote efficiency, encourage innovation, and support sustained economic growth.
The document provides an overview of India's Competition Act of 2002. It discusses the objective of establishing the Competition Commission of India to promote fair competition and protect consumers. The Act prohibits anti-competitive agreements between companies and abuse of dominant market positions. It also regulates mergers and acquisitions. The Competition Commission of India enforces the Act and works to advocate for competition through non-enforcement measures like education programs. The Act has been amended over time to address challenges in its implementation and continue meeting India's evolving economic needs regarding fair competition.
News Update: Transfer Pricing- Marketing Intangible - Delhi High Court DecisionAkshay KENKRE
16 March 2015: Delhi High Court rules on applicability of transfer pricing on Marketing Intangibles. The ruling will bring in clarity on the aspect of Marketing Intangibles and would reduce litigation on the expenditure incurred on advertisement, marketing and promotion by the multinational companies. We present to you a snapshot of 142 pager decision given by the high court highlighting important principles around the issue and our views on the same.
Trust you will find it useful.
Happy reading !!!
Objectives & Agenda :
Transfer Pricing is one of the most litigious areas in Taxation. In this Webinar we shall look at some of the recent Judicial Precedents in Transfer Pricing Law with the aim of understanding the issues which arise and the views taken by the Authorities and the Court of Law. The Webinar discusses the facts of the case, issues and the Principles held by the Courts in each of these Decisions.
TransPrice presents to you TransPrice Times for December 2014 & January 2015.
The subject of transfer pricing is ever evolving. This newsletter endeavors to keep you updated with recent happenings in the transfer pricing regime. We aim to provide information on the latest case laws pronounced. Trust you will find it useful.
Happy reading !!!
The document summarizes three court cases related to transfer pricing in India:
1. In the first case, the court ruled in favor of Thomas Cook (India) Limited and held that AMP expenditures could not be considered an international transaction without direct evidence of benefit to an associated enterprise.
2. In the second case, the court ruled against ZTE Corporation and considered the economic life of the permanent establishment in determining profit attribution. It also ruled more profits could be attributed if functions, assets and risks were not properly analyzed.
3. In the third case, the court ruled against Aptara Technologies and directed it to use single year data for transfer pricing analysis unless multiple-year data could be proven more functionally
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!!!
TransPrice Times 16th - 31st August 2017Akshay KENKRE
Dear Members,
We are pleased to present TransPrice Times for Second fortnight of the month of August 2017.
This periodical broadly covers important rulings, addressing different key issues pertaining to foreign exchange gain as operating revenue, transfer pricing adjustment on non-utilization of agreed services and determination of most appropriate methods in transfer pricing.
We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in
Thank You and Happy Reading!!
1) HMRC has issued new guidance on employers recovering VAT on pension fund management costs. The guidance recognizes that due to the unique structure of UK pension schemes, employers can reclaim VAT if they meet certain conditions, such as directly paying the fund manager.
2) An advocate general opinion found that holding companies can fully recover VAT on costs related to acquiring subsidiaries and raising capital as long as the activities are directly linked to the company's overall economic activities.
3) A tribunal case confirmed that for VAT purposes, the value of a part exchange vehicle in a new car sale is the amount agreed between the dealer and customer, not any estimated market value.
TransPrice Times 15th to 30th September 2015Akshay KENKRE
Dear Readers,
We are delighted to present second fortnight edition of TransPrice Times for the month of September 2015.
This newsletter gives a snapshot on significant transfer pricing case laws pronounced in relation to issues like marketing intangible, consistency rule and corporate guarantees along with updates on recent happenings in India.
We hope you find it useful and look forward to your feedback.You can write to me at akshaykenkre@transprice.in
Happy reading !!!
TransPrice Times 16th - 30th April 2017Akshay KENKRE
Dear Members,
We are pleased to present TransPrice Times for the second fortnight of April 2017.
Issues on permanent establishments, brand development, deemed international transactions and royalty payments are discussed in this periodical.
This document summarizes several transfer pricing cases from the TransPrice Times publication.
The first case discusses Vodafone Essar Digilink Ltd. where the ITAT rejected the use of a foreign comparable transaction to benchmark royalty payments. However, it also rejected the tax officer's argument of nil royalty.
The second case discusses Blue Scope Steel India Private Limited, where the ITAT accepted the taxpayer's argument that seconded employees were on its payroll, so salary reimbursements should be allowed.
The third case discusses Amphenol Interconnect India Private Ltd. where the High Court upheld the Tax Court's use of TNMM over CUP and rejected differences in sales commissions.
The last case
The Indian and US tax authorities have reached an agreement on transfer pricing for information
technology services provided by Indian subsidiaries of US multinational enterprises. Specifically, they have
agreed to accept a markup of 18% of costs as the arm's length price for fiscal years 2004-2005, resolving
disputes where Indian tax authorities had imposed higher markups. Some affected taxpayers now have the
option to accept this mutual agreement procedure resolution or continue domestic tax appeals.
Brand promotional expenditure has become a
subject of great interest in the Indian Transfer
Pricing circle after the decision of Delhi High
Court in the case of Maruti Suzuki Vs ACIT, TPO.
This expenditure is spent to create an intangible
asset even though they may have no book value
in the company’s Balance Sheet. The decision of
the Delhi High Court has triggered a lot of
debates as it has proposed an altogether new
methodology to determine whether the brand
promotional expenditure incurred by the Indian
entity benefitted the foreign holding company.
This paper seeks to analyse the brand
promotional expenditure from the bird’s eye
point of view by tracing to its origin
(i.e.,Glaxosmithkline- US Case) and the methods
used by different countries to determine whether
brand promotional expenditure is at arm’s
length. This paper also analyses various
decisions of the High Courts (HC) and Income
Tax Appellate Tribunals (ITATs) of India.
TransPrice Times - October & November 2017Akshay KENKRE
Dear Members,
We are pleased to present TransPrice Times for the month of October & November 2017.
This periodical covers key court rulings on the issues of entity level approach over transactional approach, treaty benefits, receivables from an associated enterprise, royalty & TDS provisions, and real income theory. Apart from this, recent news relating to India's stand on MAP and bilateral APA applications has been discussed in the periodical.
Thank You and Happy Reading!!
This document discusses transfer pricing and provides guidance on mastering it. Transfer pricing involves setting the right prices for transactions between related entities in different countries. It is a strategic tool that can help businesses minimize tax risks and maximize profits if implemented properly. The document outlines the two-pillar framework adopted by the OECD to harmonize transfer pricing principles globally. It also explains the five main transfer pricing methods and highlights advantages and disadvantages of each to help choose the most appropriate one. The overall message is that mastering transfer pricing through guidance from experts can help businesses navigate global tax regulations and thrive internationally.
TransPrice presents to you TransPrice Times for October 2014.
The snippet includes recent happenings in the transfer pricing world including the landmark judgement in the case of Vodafone and Mitsubishi (Japanese Sogo Shosha Companies). Trust you will find it useful. Happy reading !!!
Dear Readers,
We are pleased to present TransPrice Times for the first fortnight of July 2016.
In this bulletin, some key issues in Indian litigation have been discussed with regard to nature of foreign exchange fluctuations, selection of tested party for carrying out transfer pricing audit and method of benchmarking royalty transactions. Meanwhile on the international taxation front, OECD is keeping MNCs on its toes by releasing various discussion drafts on the work recommended under Action 4 (limiting interest deductions) and Action 7 (Preventing Artificial Avoidance of Permanent Establishment Status).
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!!!
Dear Readers,
We are pleased to present TransPrice Times for the first fortnight of July 2016.
In this bulletin, some key issues in Indian litigation have been discussed with regard to nature of foreign exchange fluctuations, selection of tested party for carrying out transfer pricing audit and method of benchmarking royalty transactions. Meanwhile on the international taxation front, OECD is keeping MNCs on its toes by releasing various discussion drafts on the work recommended under Action 4 (limiting interest deductions) and Action 7 (Preventing Artificial Avoidance of Permanent Establishment Status).
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!!!
TransPrice Times - 16th - 31st May 2017Akshay KENKRE
Dear Members,
We are pleased to present TransPrice Times for the second fortnight of May 2017.
This periodical covers important rulings, addressing key transfer pricing issues related to adhoc adjustments, payment of management fees, risk adjustment and AMP adjustment. Further, in the backdrop of constant dynamism on the international taxation front, OECD has recently released a discussion draft on Hard-To-Value-Intangibles which has been covered in this periodical.
This document provides summaries of three transfer pricing cases in India:
1) The Delhi High Court confirmed a Tribunal decision that allowed a taxpayer to use the Berry Ratio as a profit level indicator for indent transactions and rejected the tax authority's recharacterization of those transactions as trading.
2) The Mumbai Tribunal accepted a taxpayer's claim for an adjustment due to market factors like increased competition and price pressures, which reduced its profit margins below the comparable companies.
3) The Hyderabad Tribunal rejected the tax authority's substitution of actual revenues for projected revenues in its discounted cash flow valuation of intellectual property rights sold by a taxpayer to an affiliate. It also rejected the authority's application of the profit split method and other adjustments
Similar to Issue of marketing intangibles in India- Breath of Fresh Air (20)
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Issue of marketing intangibles in India- Breath of Fresh Air
1. International Taxation
www.icai.org 89THE CHARTERED ACCOUNTANT OCTOBER 2015
Issue of Marketing Intangibles in India-
Breath of Fresh Air
In India, the issue of marketing intangibles has been the most contentious transfer pricing issue. In
the last couple of years, multinational companies across India have confronted significant amount
of transfer pricing adjustments by virtue of this issue. The Delhi High Court ('DHC') in a landmark
judgment in the case of Sony Ericsson Mobile Communication India Private Limited vs. CIT (ITA No.
16/2014 - taxsutra.com) and various other taxpayers1
(engaged in distribution business), ruled on
the transfer pricing issue of excessive advertisement, marketing and promotional ('AMP') expenses
incurred by the Indian affiliate of multinational enterprises. In this ruling, the DHC has laid down
many important principles for dealing with the AMP issue. The author in this article examines this
judgment from the perspective of various open questions that have emerged after this DHC ruling.
Read on...
CA. Ajit Kumar Jain
(The author is a member of the
Institute who may be contacted
at cajainajit@gmail.com.)
by the taxpayer to its Associated Enterprises ('AE').
Accordingly, the excessive AMP (advertisement,
marketing and promotional) expenditure was
considered as an international transaction under
the Indian transfer pricing regulations. Further, the
TPO had contended that since the taxpayer did not
receive any compensation for such excessive or non-
routine AMP expenses, it should be compensated
for such expenses on the basis of arm’s length results.
In order to benchmark the excessive AMP
expenses and to compute the arm’s length price,
the TPO had applied bright line test (a concept that
originated from the international ruling in the case
of DHL Corporation & Subsidiaries vs. Commissioner
in USA). The TPO had compared the AMP expenses
incurred by the taxpayer with the AMP expenses
incurred by the third party comparable companies.
1
There are 17 connected matters related to several taxpayers including appeals and cross appeals filed by the taxpayers and by tax authorities
The Issue
The dispute with regard to marketing intangibles
arose at the time of transfer pricing scrutiny, when
the transfer pricing officer (‘TPO’) alleged that the
taxpayer had contributed in the development of the
brand (legally owned by its parent company outside
India) by incurring excessive or non-routine AMP
expenses. Further, the TPO had contended that
such contribution considered as a service provided
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2. International Taxation
www.icai.orgTHE CHARTERED ACCOUNTANT OCTOBER 201590
Based on the same, the TPO had made adjustments
to the income of taxpayer on account of such a
difference.
The History
The aforesaid controversy enflamed when the DHC
in case of Maruti Suzuki Limited [TS-212-ITAT-
2013(DEL)-TP] upheld that the excessive AMP
incurred by the Indian taxpayers resulted into brand
promotion of its AE. However, the said ruling was
remanded back to the tax authorities by the Supreme
Court.
Since the issue of marketing intangibles had
become the key transfer pricing issue for many
taxpayers across India, the Income Tax Appellate
Tribunal (‘ITAT’) had constituted a Special Bench
(‘SB’) in the case of LG Electronics India Private
Limited vs. ACIT [2014] 146 ITD 165 Del (‘LG
Electronics’). The SB in the case of LG Electronics
rejected the contentions of taxpayers and upheld
that the AMP expenses incurred by the taxpayer for
creating or improving the marketing intangible for
and on behalf of AE is permissible.
The Delhi High Court in the case of Sony Ericsson
Mobile Communication India Private Limited vs.
CIT (ITA No. 16/2014- taxsutra.com) and various
other similar matters pronounced its ruling on the
issue of marketing intangibles. It is a path breaking
ruling which gave emphasis on the fundamentals
of the transfer pricing while dealing with this issue.
Principles laid down in this ruling have various
deviations from those upheld by the SB of the Delhi
Tribunal. In a nutshell, this ruling is a welcome move
towards the resolution of this contentious transfer
pricing issue.
The Debate
The whole debate around the issue of marketing
intangibles can be summarised in the following key
points:
• Whether contribution in brand promotion can
be considered as international transactions
under Indian transfer pricing regulations
• Aggregation of transaction and use of
transactional net margin method ('TNMM')
• Whether the concept of economic ownership
exists in real sense
• Whether bright line test is a valid method
to compute the arm’s length price of AMP
transaction
• Treatment of selling and distribution
expenditure.
Let us evaluate each of the aforementioned questions
in the light of the DHC ruling.
I. WhetherAMPexpenditureisaninternational
transaction
In the submissions before tax authorities, the
taxpayer had made the following contentions:
- No such transaction existed in the absence
of any understanding between the AEs and
the Indian taxpayer
- The parent company has not availed itself of
any benefit by the AMP expenses incurred
by taxpayer in India.
In view of the above, the taxpayer had
contended that the AMP expenses were out of
the purview of the international transaction as
per the Indian transfer pricing regulations.
The SB in the case of LG Electronics has
upheld that in view of the provisions of the
Section 92B read with the explanation (i)(d)
to Section 92B of the Income-tax Act, 1961
(‘the Act’), an agreement between AEs can be
formal or informal/written or oral, therefore,
what is relevant is the conduct of the parties
to the transaction. Therefore, it gives rise to
an international transaction under the Indian
transfer pricing regulations.
The DHC has rejected the contentions
of the taxpayer and held that the declared
price of international transactions included
the remuneration for their AMP function; the
argument that it is not international transaction
is incorrect. Further, the DHC has also held that
a separate reference to the TPO is not required
once the primary international transaction
related to distribution activity is referred.
II. Aggregation of transaction and use of TNMM
The DHC has held that in a situation where
multiple transactions are so interlinked that
they cannot be evaluated on separate basis,
aggregation of transaction is both desirable
The DHC has rejected the contentions of the taxpayer
and held that the declared price of international
transactions included the remuneration for their
AMP function; the argument that it is not international
transaction is incorrect.
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3. International Taxation
www.icai.org 91THE CHARTERED ACCOUNTANT OCTOBER 2015
and permissible. The DHC has held that the
fundamental part of analysis is to find out the
characterisation of entity which has incurred
non-routine or excessive AMP expenses.
It has held that the tax authorities should
conduct a detailed functions assets and risk
analysis to examine whether the functions
performed by taxpayers are of a pure distributor
or performing both distribution and marketing
functions. If the distribution and marketing
functions are interrelated, the arm's length
price can be computed by aggregating both the
functions.
The DHC has further analysed whether
TNMM method can be applied to benchmark
AMP expenses. It has held that once the TPO
accepts and adopts the TNMM and then
chooses to treat a particular expenditure like
an AMP as a separate international transaction
without bifurcation/segregation, it would lead to
unusual and incongruous results. Furthermore,
in the case of the Resale Price Method, the High
Court held that if gross profit margins match
or are within the specified range, no transfer
pricing adjustment is required in the case of
AMP. In such cases, gross profit margin would
include the margin or compensation for the
incurred AMP expenses.
The SB ruling in case of LG Electronics
has laid down the dictum in case of a licensed
manufacturer. The DHC ruling is concerning the
distributor. Now the question arises whether the
aforesaid principle laid down by the DHC can
actually be applied to a licensed manufacturer.
In most of the cases, a licensed manufacturer
operates as entrepreneur and is responsible
for the rewards for the functions performed
and risk assumed, and it is wholly responsible
for the residual profits/losses in its territory
after making the payment for international
transaction with AE at arm’s length basis. In this
scenario, the licensed manufacturer, incurring
non-routine AMP expenses, is not contributing
in the promotion of brand of its parent company
and the whole issue of marketing intangibles is
irrelevant in this case. In other words, if any
non-routine expenses incurred by the licensed
manufacturer are for its own business and
the licensed entrepreneur only reaps benefit
from such non-routine marketing efforts, the
licensed manufacturer is not entitled to get
compensation from its AE for the non-routine
or excessive AMP spend.
However, there may be a scenario where
a licensee makes substantial investments
in promoting the brand of its AE or parent
company. In such a scenario, the principle laid
down by the DHC ruling can be applied and
if the margin of the licensed manufacturer is
higher than margin earned by the comparable
companies (applying TNMM method), the non-
routine AMP expenses can be considered to be
at arm’s length. Alternatively, the excess AMP
costs borne by the licensee can be compensated
by relatively lower or a declining royalty rate.
It is important to note that the guidance
provided by Organization of Economic Co-
operation and Development (‘OECD’) and
Australian Tax Office (‘ATO’) are in the context
of marketers/distributors and not for license
manufacturers. This makes it evident that both
these esteemed organisations too do not support
the issue of marketing intangibles to arise in the
context of license manufacturers. As per the
said guidance, a normal distributor undertaking
normal risks, if it performs extra functions on
account of marketing and advertisement front
as compared to independent distributors in
market, the distributor should be remunerated
for the cost incurred on such extra functions.
Further, such remuneration can come either
in the form of reduction in purchase price of
products or through a reimbursement for excess
or non-routine AMP expenses.
III. Whether the concept of economic ownership
exists in real sense
There are two elements of returns related
to a brand, namely one for legal ownership,
and the other for economic ownership. The
economic owner of an intangible asset enjoys
the benefit from the income generated by the
However, there may be a scenario where a licensee
makes substantial investments in promoting the
brand of its AE or parent company. In such a scenario,
the principle laid down by the DHC ruling can be
applied and if the margin of the licensed manufacturer
is higher than the margin earned by the comparable
companies (applying TNMM method), the non-routine
AMP expenses can be considered to be at arm’s length.
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4. International Taxation
www.icai.orgTHE CHARTERED ACCOUNTANT OCTOBER 201592
intangible it creates and owns. For example,
where any manufacturer or a distributor
performs significant marketing functions,
undertakes risks and takes decision for framing
the marketing strategies as a licensee of brand,
the distributor becomes economic owner of
such marketing intangible developed by it its
jurisdictions.
The taxpayers alleged that even in a
scenario, where the AMP expenditure led to the
creation of marketing intangibles for the AE,
the economic ownership of such intangibles
rests with the Indian entity and hence, the
Indian entity need not be remunerated for its
marketing efforts.
As per the SB ruling in case of LG Electronics,
economic ownership of a brand exists only in
a commercial sense, and in the context of the
Indian Income-tax Act, 1961, it is only legal
ownership which is recognised. The DHC
decision has given importance to the concept
of economic ownership in case of distributors.
Such importance cannot be understated due to
the fact that economic ownership is the key fact
to find out while performing functional analysis
for transfer pricing purposes.
The DHC has upheld that the economic
owner must be adequately compensated for
its economic ownership in event of alienation
of intangibles. Further, the court held that
economic ownership of a trade name or trade
mark is accepted in international taxation as one
of the components or aspects for determining
transfer pricing. Economic ownership when
pleaded can be accepted if it is proved by the
taxpayer.
The revised OECD discussion draft on
the transfer pricing aspect of intangibles also
provides guidance in relation to the arm’s
length value of intangibles based on the
economic activities performed by the entity.
Economic ownership is a reality and one cannot
get appropriate arm’s length results without
considering the economic owner and its return
attributable in development of intangible.
IV. Whether bright line test is a valid method to
compute arm’s length price
As per the SB in the case of LG Electronics, Bright
Line is a ‘way of finding out the cost/value of
international transaction. The Special Bench in
effect concurred with the Revenue who referred
to Bright Line as a ‘tool’ to ascertain the cost of
the international transaction.
The DHC held that there was nothing in the
Act or Rules to hold that it was obligatory for
the AMP expenses to be subject to ‘Bright Line
Test’ and the non-routine AMP expenses as
separate as a separate international transaction.
The Court has granted relief to the taxpayers
by holding that if aggregated transaction is
concluded to be at ALP by applying TNMM
or RPM, there is no need to bifurcate and
treat AMP expense as separate international
transaction.
This was a crucial relief for the taxpayers
who have suffered significant transfer pricing
adjustment with the application of bright line
test since bright line methodology does not
match or inconsistent with the arm’s length
principle. Although the High Court has not
specifically mentioned the methodology for
computing the AMP adjustment, it has provided
detailed guidance on fundamentals of transfer
pricing while dealing with this issue.
The DHC held that there was nothing in the Act or Rules
to hold that it was obligatory for the AMP expenses
to be subject to ‘Bright Line Test’ and the non-routine
AMP expenses as separate as a separate international
transaction
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5. International Taxation
www.icai.org 93THE CHARTERED ACCOUNTANT OCTOBER 2015
V. Treatment of selling and distribution expenses
The Special Bench ruling had upheld that selling and
distribution expenses (discounts, commission, sample
expenses, trade incentives, etc.) do not form a part of
the AMP expenses and hence, these expenses cannot be
considered while computing the bright line test. The DHC
has agreed with the SB and held that direct marketing
and sales related expenses are not directly linked to brand
building but have a direct and immediate connect with
increased sales.
Conclusion and the Way Forward
The DHC ruling is quite welcoming, since it has provided a
roadmap to deal with this contentious issue. The DHC has held
that transfer pricing regulations are anti-avoidance provisions
and it should be invoked selectively and must not result in
double taxation.
The DHC has given emphasis to the fundamentals of the
transfer pricing principles while computing the arm's length
price of the AMP transaction. The DHC judgement broadly
rejects the application of bright line methodology since it has no
statutory mandate. The DHC has granted relief to the taxpayers
while holding that if bundled transactions are concluded to be
at arm’s length by applying TNMM or RPM, then there is no
need to bifurcate and treat AMP as a separate transaction.
While this ruling has given much clarity on this issue, there
are some open question on which debate could arise such as how
the arm's length price of the AMP transaction is to be computed
where it is not possible to aggregate the transactions, say for
example, where the taxpayer applied Comparable Uncontrolled
Method for benchmarking its routine transaction (other than
AMP expenses). Further, where the taxpayer believes that its
whole AMP expenditure is routine and it has not incurred
any non-routine expenses towards promotion of brand, in this
scenario, the key question is whether the taxpayer is required to
report its AMP expenses as international transaction.
The issue of marketing intangibles is factual in nature.
The DHC has pronounced its ruling in case of distributor
considering the facts of the case. It is very important to apply
the key transfer pricing principles for computing the arm’s
length price of the AMP transaction. For dealing with this issue,
a detailed functions, assets and risk analysis plays a vital role
to get a detailed understanding of the taxpayer’s functions and
it’s characterisation for transfer pricing purposes. In view of
the same, it is very important for the taxpayer to analyse the
following in detail and maintain robust documentation in order
to justify the arm’s length nature of its AMP expenses:
• Characterisation of each entity involved in transaction;
• Level of marketing efforts performed by the Indian entity;
and
• Licensing arrangement.
577