Tuesday, April 02, 2013

Comparables and Transfer Pricing

Comparables and Transfer Pricing


Aztec Software case
The court held that though there are no guidelines as to what threshold should be used for inquiring into comparables and related party transactions but the court tried and interpreted the act itself to find a solution. The definition of associated enterprise as in Section 92 A (2) (b) which prescribes that in case a company owns 26% of the shares of a company it would be deemed to be an associated enterprise, also Section 40 A(2)(b) states that any person who carries more than 20% of the voting power of the company is defined as a person having a substantial interest in the company. Therefore interpreting the two provisions harmoniously the court said that 25% would a good estimated limit to check whether a certain comparable have related party transaction should be rejected.
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