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.
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