Home Audit & Assurance ITAT rules in favour of BBC in transfer pricing case, rejects IT tax department appeals

ITAT rules in favour of BBC in transfer pricing case, rejects IT tax department appeals

ITAT rules in favour of BBC in transfer pricing case, rejects IT tax department appeals

ITAT guidelines in favour of BBC in switch pricing case, rejects IT tax division appeals

The Delhi Revenue Tax Appellate Tribunal upheld the remedy of promoting bills as pass-through prices, which got here as a consolation to BBC India.

An Appellate Tribunal confirmed a ruling by the Commissioner of Revenue-tax (Appeals) in a two-decade-old evaluation dispute involving BBC India, the place the CIT (A) had discovered that the remedy of bills related to commercial is dealt with as a pass-through value.

Specialists highlighted that this was a separate subject from the controversial tax evasion case through which the BBC allegedly despatched an e mail to the Central Board of Direct Taxes (CBDT) admitting to underreporting Rs.40 crore of revenue in its tax returns. Groups from the Revenue-Tax division have been on the BBC workplaces in New Delhi and Mumbai in mid-February this 12 months conducting a “survey” for alleged tax fraud.

To summarise the scenario, BBC India is a subsidiary of BBC Group enterprises that gives advertising and marketing help and different miscellaneous companies. It was paid on a cost-plus foundation, with the fee together with any bills spent within the provide of companies.

Through the Evaluation 12 months (AY) 2004-05, BBC India incurred promoting bills for buying advert house in newspapers. The associated fee was excessive, and the hassle required to get such space was minimal.

Moreover, the funds for these bills was managed by abroad group entities/associated corporations, and the related enterprises bore the danger and profit of those bills.

In consequence, as a result of these prices weren’t incurred in reference to the supply of companies, BBC India didn’t embrace them in its value base for charging a markup to its related corporations, however as an alternative sought value reimbursement for them.

The Revenue Tax Division, alternatively, regarded these prices to be a part of the bills for offering companies and included them within the markup. In consequence, the Tax Division requested a Switch Pricing adjustment, which BBC India opposed earlier than the Revenue Tax Division’s appeals division.

The enchantment wing dominated in favour of BBC India, noting that promoting bills for buying advert house in newspapers weren’t incurred for the aim of offering companies. In consequence, reimbursement of such prices with no markup glad the arm’s size normal.

Regardless of this, the Tax Division disagreed with the appeals wing and filed an enchantment with the Appellate Tribunal. In its resolution, the Tribunal acknowledged the conclusions of the appeals wing in addition to BBC India’s declare, deciding in favour of BBC India.

The Tribunal noticed promoting bills as pass-through prices that shouldn’t be included in the fee base for charging a markup. It was famous within the inter-company settlement that the actions for which the Indian entity was required to ship companies to its linked corporations have been specified.

The Tribunal underlined that promoting bills concerned excessive prices and minimal effort to buy advert house, and that these prices have been handled as pass-through, whereas all different prices have been deemed a part of the fee base and topic to markup.

It’s important to emphasize that that is unrelated to the February search operation at BBC India.

In response to specialists, BBC’s triumph could set a precedent for a number of different world companies to comply with an identical technique for commercials.

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