20 June 2013
If an Indian company is providing services to its Associated Enterprise(AE) in USA and the AE is using these services further to complete its contractual obligation to a client based in USA.
The AE adds 4% profit margin to what the Indian company charges from it and provides the service to client at such price.
Will the transfer price on the Indian company be such sale price of service inclusive of 4% profit margin set by AE or without it.
Ex:
Supply price by Indian Co. to AE =Rs. 100
Profit Margin 4% =Rs. 4
Value of service charged =Rs. 104 from client
Will the transfer price for the Indian company be Rs. 100 or Rs. 104?
transfer pricing is a different concept... its all about arm lenght's price..
deptt. will neither see at what price you have supplied service to your AE or at what price your AE has forwarded that service..
their only focus would be if the same service is provided to a non associated person under similar terms and conditions then what would be the normal charge for that service.. that price is treated at transfer price for calculating value of service..
for that purpose deptt. may take quataions from other suppliers of the same service..
CAclubindia
