Pronouncement explaining transfer pricing principles on right of TPO to collect info u/s 133(6), exclusion of high profit comparables, adjustment for limited risk environment, exclusion of reimbursement costs for computing operation margins

Last updated: 29 October 2014

Court :
ITAT Hyderabad

Brief :
HSBC Electronic Data ProcessingIndia Private Limited (hereafter referred to as ' HDPI ') is awholly owned subsidiary of HSBC Holdings Plc (together with its associates referred to as 'HSBC Group'). During the course of assessment, the TPO after obtaining information from the company u/s 133(6) of the act, the TPO treated it as comparable by observing that the company is engaged in IT enabled services and qualifies all the filters adopted without giving the assessee an opportunity/information to examine the comparability. Held that before utilising the information obtained, he has to give fair opportunity to the assessee. Also held that company showing extraordinarily high profit cannot be treated as comparable and have to be excluded. Assessee seeked adjustment for risk being taken by comparable since it was operating in a risk mitigated environment vis-à-vis the comparable companies performing entrepreneurial risk taking functions whose profit would be more dependent on the risk involved. Also held that reimbursement transactions though international transactions towards travel, air fare and site expenses relating to employees of AE travelling to India for business purposes are to be excluded for working out the operative costs/operative margins.

Citation :
HSBC Electronic Data Processing India P. Ltd. – Appellant – Versus – ACIT - Respondent

Daily Limit Reached