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Clsa India P. Ltd, Mumbai vs Dcit Cir 4(1)(1), Mumbai on 16 January, 2019 cites

Pr. Commissioner Of Income Tax 7 vs M/S Merck (India) Limited Formerly E ... on 9 January, 2019

22. Section 92C(1) of the Act, contemplates that the arms length price in relation to an international transaction shall be determined by comparable 19 ITA No. 1182/MUM/2017 Assessment Year: 2012-13 uncontrolled price method; resale price method; cost plus method; profit split method; transactional net margin method or such other method as may be prescribed by the Board. Hence, the TPO is bound to determine the ALP by following one of the prescribed methods, however, we notice that in the present case the Ld. TPO has not followed any prescribed methods and made the transfer pricing adjustment by estimating the man hours and the cost of service per hour. We therefore, find merit in the contention of the Ld. counsel that any ad-hoc determination of arms length price by the Ld TPO u/s section 92 de-hors section 92C(1) of the Act cannot be sustained. The contention of the Ld. counsel is further supported by the judgment of the Hon'ble jurisdictional High Court in the case of Commissioner of Income Tax vs. Merck Ltd. 389 ITR 70 (Mum). In the said case the Hon'ble High Court decline to interfere with the findings of the Mumbai Bench of the Tribunal that the transfer pricing adjustment made by the TPO without following one of the prescribed methods makes the entire transfer pricing adjustment unsustainable in law. The grievance of the revenue was that the consideration paid to the AE is only attributable to the services received / availed.
Bombay High Court Cites 7 - Cited by 20 - Full Document

Asst Cit (Ltu)1, Mumbai vs Johnson & Johnson Ltd, Mumbai on 26 December, 2018

20. From the observations of the Ld. TPO, it is clear that TPO has made the transfer pricing adjustment purely on estimation basis without any supporting material. Though the Ld. TPO has mentioned that arms length price has determined by applying CUP method but in fact the Ld. TPO has not come up with any comparables to justify the application of cup method. The Ld. TPO has not brought on record any material to substantiate that the AE provided the similar services to an independent enterprise in comparable circumstances. The Ld. TPO has also not brought on record any instance where comparable services were provided to an independent enterprise in the recipient market. So in view of the fact that the Ld. TPO has, in fact, not applied the CUP method to determine the arm's length price of the transaction, there is no reason to reject the TNMM method applied by the assessee. The Hon'ble jurisdictional High Court in the case of Johnson & Johnson Ltd. (supra) while dealing with the issue of determination of arm's length price of royalty on estimation basis by the TPO held as under:-
Income Tax Appellate Tribunal - Mumbai Cites 7 - Cited by 34 - Full Document
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