India: Prior MAP not justification for proposed transfer pricing adjustment

India: Prior MAP, proposed transfer pricing adjustment

The Delhi Bench of the Income-tax Appellate Tribunal held that when, in an earlier year, the taxpayer accepted the tax department’s position pursuant to mutual agreement procedure (MAP) proceedings, the taxpayer’s acceptance was not to be considered to be a basis for the taxpayer’s consent for a transfer pricing adjustment proposed by the tax authorities for a later year.

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The case is: ACIT v. Turner International India Pvt Ltd.


The taxpayer—engaged in the distribution of satellite TV channels and soliciting advertisements to be telecast on TV channels—aggregated its transactions pertaining to the distribution functions (subscription fees paid, advertisement rights, etc.) and benchmarked these by comparing its operating margin with companies engaged in the distribution of retail products.

The Transfer Pricing Officer disregarded the “functions performed, assets used, and risks assumed” (FAR) analysis, and instead used service providers as comparables for the taxpayer’s distribution segment and proposed a transfer pricing adjustment. 

In earlier years, the taxpayer had selected distributors as comparables, whereas the tax department had used service providers as comparables. The taxpayer had then accepted the tax department’s position during MAP proceedings.

The tribunal held that the taxpayer’s action in the prior year (of accepting the comparables in the MAP proceedings) is not to be consider consent of the taxpayer for the adjustments proposed in the assessment year under examination.


Read a June 2016 report [PDF 315 KB] prepared by the KPMG member firm in India: Even though in earlier years, the taxpayer itself had accepted the department’s stand in MAP proceedings, this should not be considered as a consent of the taxpayer for the adjustment proposed by the department in earlier years

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