India: Transfer pricing transactions with branch office | KPMG | GLOBAL

India: Transfer pricing not applicable to transactions with branch office

India: Transfer pricing transactions with branch office

The Delhi Bench of the Income-tax Appellate Tribunal held that transfer pricing provisions cannot apply in respect of transactions between the Indian head office and its overseas branch office in Canada.

1000

Related content

The case is: Aithent Technologies Pvt. Ltd v. DCIT (ITA No. 6446/Del/2012)

Transactions between the taxpayer, an Indian company and its overseas branch office in Canada, were treated as international transactions and the arm's length price was determined by the Transfer Pricing Officer. The taxpayer also entered into an international transaction with its wholly owned subsidiary in the United States, and adopted the Transactional Net Margin Method (TNMM) as the most appropriate method. The Transfer Pricing Officer, however, applied a number of search filters in selecting comparable companies and accordingly made a transfer pricing adjustment. 

The tribunal held that there can be no profit from trade with one's self and thus that there cannot be a valid sales transaction between a branch office and its head office. Concerning the transactions with the related party in the United States, the tribunal did not find support for the transfer pricing adjustment.

 

Read an October 2016 report [PDF 316 KB] prepared by the KPMG member firm in India: Transfer pricing provisions do not apply in respect of transactions between the Indian head office and its overseas branch office

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.

Connect with us

 

Request for proposal

 

Submit