The Kolkata Bench of Income-tax Appellate Tribunal dismissed the tax department’s appeal, and upheld the taxpayer’s aggregation of information technology (IT) services and information technology enabled services provided to related parties under a single composite contract for Assessment Year 2010-11. In recognizing the aggregate analysis of transactions under a bundled arrangement, the tribunal referred to the OECD’s Transfer Pricing Guidelines, with specific reference to the base erosion and profit shifting (BEPS) Actions 8-10, the UN Transfer Pricing Manual, and the UK Transfer Pricing Guidelines.
The case is: Data Core (India) Pvt. Ltd.
The taxpayer provided routine software development and back-office processing services, pursuant to a single composite contract, to a related party. The taxpayer also provided similar services independently to third parties.
The taxpayer, in establishing the arm's length nature of the services provided to the related parties, benchmarked the transaction-level analysis with reference to the composite contract and applied a "bundled pricing” arrangement. The segmented margin of the services provided to the related parties was benchmarked against third-party comparable prices.
The Transfer Pricing Officer rejected the bundled pricing arrangement and rejected the IT comparables. The Dispute Resolution Panel, however, accepted the taxpayer's position. The tribunal also agreed with the taxpayer's treatment of the transactions.
Read a December 2017 report [PDF 595 KB] prepared by the KPMG member firm in India
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.