India vs ST Microelectronics Pvt. Ltd., September 2020, Income Tax Tribunal, ITA No.6169/Del./2012

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Category: Benchmark, Range and Median, Comparability Analysis, Services and Fees, Transfer Pricing Methods | Tag: , , , , , , , , ,
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ST Microelectronics Pvt. Ltd. is a subsidiary of ST Microelectronics Pte. Ltd. which in turn is a wholly owned subsidiary of ST Microelectronics NV, Netherlands.

ST Microelectronics Pvt. Ltd. is into the business of Integrated Circuit Design, CAD Tools and software development for its overseas group concerns. It also provides marketing support services to a group company and software development services related to design implementation and maintenance with respect to Integrated Circuits as required by guidelines/instructions. During the year under assessment, the taxpayer entered into various transactions with its Associated Enterprises.

In order to benchmark its international transactions qua provision of software development services and qua provision of marketing support services ST Microelectronics used Transactional Net Margin Method (TNMM) with Operating Profit/Operating Cost as the Profit Level Indicator (PLI) being the Most Appropriate Method (MAM), computed its own margin at 11.11% as against weighted average arithmetic mean margin of 19 comparables at 11.31% and found its international transactions at arm’s length.

The Transfer Pricing Officer by applying qualitative and quantitative filters finally selected 13 comparables and computed their margin at 23.20% and thereby computed the adjustment of Rs.38,30,91,011/-.

The taxpayer carried the matter before the Disputes Resolution Panel by way of filing objections who has excluded one comparable and included another comparable in the final list which resulted in a margin of 21.53%. On that basis the adjustment was revised to Rs.33,01,81,949/-.

ST Microelectronics filed an appeal with the Income Tax Tribunal.

Judgement of the Tribunal

The Tribunal allowed the appeal filed by ST Microelectronics.

 

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India vs ST Microelectronics Pvt. Ltd September 2020 Delhi tax tribunal ITA No 6169-Del-2012

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