December 07, 2010: In its latest judgement Income Tax Appellate Tribunal, Delhi Bench ( 'ITAT - Delhi') has held that a full fledged risk taking entrepreneurial software development company cannot be considered comparable to captive software development company.
In case of Agnity India Technologies Pvt. Ltd. vs. Income-tax Officer, ITAT Delhi observed that the transfer pricing officer has considered Infosys Technologies Ltd. as one of the comparable company during transfer pricing audit in case of Agnity India Technologies Pvt. Ltd. ITAT Delhi noticed that Infosys Technologies Ltd is giant in the area of development of software and it assumes all risks, leading to higher profit. On the other hand, the taxpayer, Agnity India Technologies Pvt. Ltd., which is providing software development services on cost plus 17% markup, is a captive unit of its parent company in the USA and it assumes only limited currency risk. And accordingly Infosys Technologies Ltd cannot be considered comparable company.
This judgement of Delhi ITAT should bring relief to captive software development companies operating in India which are facing transfer pricing audit.
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Best Regards
Gaurav Garg
gaurav@jgarg.com
JGarg Economic Advisors
www.jgarg.com
Dear Gaurav,
ReplyDeleteExcellent initiative.
Kind Regards
Alberto De Franceschi
www.transferpricing.it
good initiative, keep it continued...
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