Mumbai tribunal accepts higher price paid to AE
July 26, 2010
Hasnain Shroff and Vinita Chakrabarti report on the Mumbai Tribunal’s ruling in the case of M/s Cheminova India Limited where a higher price paid to associated enterprises was accepted as the arm’s-length price, due to adequate commercial considerations.
In the case (Cheminova India Ltd Vs ACIT, Mumbai (ITA No.4865/Mum/05) [13 ITAT INDIA 240 (Mum)]) the taxpayer is an Indian company engaged in the manufacturing of agrochemicals, pesticides, so called weedicides and plant growth stimulators. During assessment year 2002-03, the taxpayer purchased a raw material called diethylthiophosphrol Chloride (DETPCL) from its associated enterprise (AE) and non-AEs. The taxpayer benchmarked its international transaction of import of DETPCL from its AE selecting comparable uncontrolled price (CUP) as the most appropriate method to justify its arm’s-length price (ALP) based on the import price paid to non-AEs for the same, in addition to making references to a chemical weekly magazine (which contains information on chemicals imported through the Mumbai port).
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