Transfer pricing of fixed assets

Tax queries 1284 views 2 replies

llllVICTORllll

Internal Auditor

511 Points Posted on 10 January 2013

Hi

I require Guidance in calculation ALP for transfer of fixed Asset to a sister concern.

How to compute arms lenght price when Asset is say 2 years old and depreciation is being claimed by the transferring company?

Which method to use?

1. I Thought of Cost Plus method where cost will be reduced by the depreciation already claimed and say add 5% margin on transfer and maintain such 5% margin uniformly for all similar sale in future to related and not related party.

Please Advise if i can take the above said Stand. The Matter is urgent so quick reply is appreciated.

Replies (2)

CA Sumeet Rathod

Partner

157 Points Posted on 11 January 2013

HI vICTOR

IF YOU GO THROUGH THIS Sec. it should be arms lenght price

Previously there was notifed 5% up and down is allowed..

as per ammendment notified ups and down allowed...

ask your TPO for the same howmuch in your case it is allowed the accordingly planed it

llllVICTORllll

Internal Auditor

511 Points Posted on 11 January 2013

Thank you for your reply.. But i think i didnot make my point clear.

1. This is a local related party (sister concern transction). and as per latest budget this also should be calculated based on ALP

2. Here the transferred commodity is a fixed Asset which as being depreciated. Now there is no readily available market data for the price of such asset which has aged by so and so years.

3. On what basis is the commodity expected to be transfered, for us to know if we are within 5% comfort limit.

There are my queestions.