The Income Tax Appellate Tribunal’s decision in ITA 579/DEL/2019 addresses a significant transfer pricing dispute involving FIS Global Business Solutions India Pvt. Ltd. and the Deputy Commissioner of Income Tax, Circle-9(1), New Delhi. This case highlights the complexities of assessing arm’s length prices in international transactions between associated enterprises.
The dispute originates from the assessment year 2010-11 where FIS Global contested the adjustments proposed by the Transfer Pricing Officer (TPO) concerning their international transactions with associated enterprises. The case involved multiple cross appeals filed by both FIS Global and the Revenue, challenging the orders by the Commissioner of Income-tax (Appeals).
The primary contention involved the determination of arm’s length price (ALP) for transactions related to software development and IT-enabled services. FIS Global argued that the TPO’s methodology and the selected comparables were inappropriate, leading to an inflated adjustment and an enhanced income assessment.
The tribunal meticulously analyzed the submissions, the methodologies adopted by the TPO, and the comparables used for benchmarking the international transactions. After considering the objections and the evidence presented, adjustments were made to the list of comparables, which significantly impacted the calculation of ALP.
This case underscores the critical nature of choosing appropriate comparables and applying relevant filters in transfer pricing studies. It also highlights the tribunal’s role in ensuring that transfer pricing adjustments are based on sound economic principles and accurate data.
The ITAT’s decision in ITA 579/DEL/2019 is pivotal for taxpayers and practitioners as it provides insights into the tribunal’s approach towards complex transfer pricing adjustments and the importance of substantiating the arm’s length nature of international transactions.
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