Citing Supreme Court’s Vodafone order, Bombay HC rejects transfer pricing adjustment

Relying on the Supreme Court’s verdict in the Vodafone case related to transfer pricing adjustment (TPA), the Bombay High Court upheld the Income Tax Appellate Tribunal (ITAT) ruling that had struck down the adjustments made by the taxman on an Indian company for buying shares in a fully-owned Dubai-based subsidiary on its capital account.

The assessee, PMP Auto Components, paid `2.67 crore to its subsidiary for buying shares having fair market value of `8.13 lakh. The I-T department sought to tax this difference — `2.58 crore for assessment year 2010-11.

HC observed that the assessee had purchased the shares on capital account, which renders the transactions arms length pricing moot as it wouldn’t have any bearing on profits of the Indian entity. “The issue arising here stands concluded by the decision of this Court in Vodafone,” the order said.