TPO can’t ignore certificates issued by third-party vendors of AE confirming price charged from assessee: ITAT

  • Blog|News|Transfer Pricing|
  • 3 Min Read
  • By Taxmann
  • |
  • Last Updated on 29 September, 2022

Transfer Pricing

Case Details: Kimberly-Clark Lever (P.) Ltd. v. ACIT - [2022] 142 taxmann.com 329 (Pune-Trib.)

Judiciary and Counsel Details

    • Inturi Rama Rao, Accountant Member & Partha Sarathi Chaudhury, Judicial Member
    • Percy Pardiwalla for the Appellant.
    • J.P. Chandraker for the Respondent.

Facts of the Case

Assessee-company was engaged in the business of manufacturing infant care and feminine hygiene care products. The AE of the assessee had entered into an agreement with third-party vendors for the supply of raw materials for all group entities including the assessee at an agreed price.

It was claimed that the transaction of import of raw materials from its third parties was at arm’s length price by demonstrating that the rate charged by the assessee was lower than the market price by providing the certificate from third-party vendors.

However, TPO rejected the TP study submitted by assessee on the ground that certificates issued by third-party vendors could not be considered as evidence as said third-party vendors were to be treated as deemed AE of the assessee. Accordingly, TPO made a transfer pricing adjustment. The matter reached before the Pune Tribunal.

ITAT Held

The Tribunal held that by virtue of the provisions of section 92B(2), the third-party vendors do not become AEs or deemed AEs of the assessee under section 92A. Neither the assessee nor any of the group entities participate in the capital or management of the third-party vendors from whom raw material had been purchased during the year under consideration.

Further, the certificates issued by third-party vendors confirmed that a discount of 10 percent to 20 percent had been given to assessee on raw materials supplied during year. Further, it was also confirmed that the average price charged to the assessee by third-party vendors was lower than the average price at which raw material is available in the open market.

Accordingly, TPO could not ignore these certificates by holding that same were issued by deemed AE of assessee. Thus, matter required remission to Assessing Officer/TPO to examine benchmarking analysis furnished by assessee.

List of Cases Reviewed

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied