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Any Other Method – Is it available only if none of the prescribed methods are applicable?

Indian High Court in a recent decision1 has laid down important principles with regard to selection and application of the most appropriate method for computation of arm’s length price under transfer pricing law of India.

BACKGROUND

The Indian subsidiary was providing marketing support services to its group companies against receipt of commission at a fixed rate. The consideration received by the Indian subsidiary was benchmarked applying TNMM as the most appropriate method, using Operating Profit / Value Added Expenses (‘OP / VAE’) as the indicator for 2 comparison.

The tax officer, however, applied ‘Any Other Method’ for benchmarking the transaction, wherein, he came up with 7 uncontrolled commission agreements and held that the rate at which commission is charged by Indian subsidiary is less than arm’s length rate of commission. The tax officer, accordingly, computed the shortfall / deficit of commission earned by the Indian subsidiary and added in its income.

The ‘any other method’ is the sixth method introduced by the Government of India to relax the provision of CUP method which requires actual transactions for comparison; and to consider hypothetical price which would have been charged under comparable uncontrolled conditions as the arm’s length price.

The ITAT 3 reversed the addition made by the tax officer holding that –

  1. The tax officer (TPO) had not provided any reasons for rejecting TNMM before selecting ‘Any Other Method’, and
  1. TNMM was accepted as the most appropriate method in the earlier years, and it shall not be changed unless necessary due to change in law or facts, and
  1. Berry ratio, i.e. OP / VAE is an acceptable indicator while applying TNMM [Refer decisions4 ]

The tax officer challenged the order of ITAT before the High Court of Delhi. The High Court approved the decision of ITAT on the above reasons.

ISSUE:

In the present case, the High Court also held that – ‘Any Other Method’ can be applied only if none of the Other Methods are considered as the most appropriate method. However, this finding is contrary to the following decisions –

The ITAT in case of Toll Global Forwarding India Pvt. Ltd. held that ‘any other method’ is not a residual method and for its application, it is not necessary that all other method must fail. Interestingly, the decision of ITAT was approved by High Court as well as Supreme Court.

The Special Bench in case of Star India Ltd. held that there is no order of preference in using the methods and ‘any other method’ is neither inferior nor superior to other methods.

WHILE THE VIEW TAKEN BY THE HIGH COURT IN SABIC WAS ALSO SUPPORTED BY THE FOLLOWING:

The ICAI5 says it would be necessary to justify and document reasons for rejection of all other five methods

while selecting the ‘Other Method’ as the most appropriate method.

OECD Transfer Pricing Guidelines – In cases where other methods are used, their selection should be supported by an explanation of why OECD – recognized methods were regarded as less appropriate or non workable in the circumstances of the case and of the reason why the selected other method was regarded as providing a better solution.

The Chennai Bench of Tribunal in the case of RKM Powergen Private Limited upheld application of ‘Any Other Method’ since none of the methods were applicable to the facts of the case. Similar are the decision of many Tribunal, wherein, ‘Any other method’ is selected as the last resort as per the facts of the case.

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ASTHOM Partners Holds the 2nd General Meeting

ASTHOM Partners Collaborates to Strengthen Support for Japanese Companies Globally

法人名 ASTHOM PARTNERS 株式会社 

本社所在地 100-0004 東京都千代田区大手町 1-9-5 大手町フィナンシャルシティノースタワー24 階 代表者 虷澤篤志、齋藤俊輔 

設立 2022 年 12 月 

株式会社 AGS コンサルティングと Hotta Liesenberg Saito LLP の共同出資により設立。 

資本金 1,000 万円 

事業内容 企業の商標権、著作権、特許権等の知的財産権の取得、管理およびコンサルティング業務等 Web サイト https://asthom.co.jp/ 

ASTHOM PARTNERS Welcomes UK-based Greenback Alan LLP as a New Member

ASTHOM PARTNERS Welcomes UK-based Greenback Alan LLP as a New Member

~ Providing Services Across 13 Countries and 35 Locations Worldwide ~

On June 19, 2024, the UK accounting firm Greenback Alan LLP (HQ: Spa Road, London; Managing Partner: Stephen Dabby) joined the global accounting network “ASTHOM PARTNERS”. With this addition, the member firms of ASTHOM PARTNERS now include AGS Consulting Co., Ltd. (HQ: Chiyoda-Ku, Tokyo; Chairman: Atsushi Kanzawa, President: Yoshihide Hirowatari, hereinafter “AGS”), Hotta Liesenberg Saito LLP (HQ: Torrance, California; Global CEO: Shunsuke Saito, hereinafter “HLS”), and Greenback Alan LLP.

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HLS Global and AGS Consulting Establish Joint Venture

A partnership created to empower Japanese companies to expand globally

Torrance, CA, U.S.A. / Tokyo, Japan:

On December 6, 2022, Hotta Liesenberg Saito LLP (HLS) and AGS Consulting Co., Ltd. (AGS) announced the establishment of a joint venture to provide a wide range of support services to Japanese companies expanding globally. In announcing this significant partnership, the two companies are sharing their vision, spirit, and resources while fully committed to the growth and success of all our clients.

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Indian Union Budget 2022 Highlights

The key highlights of the Indian Union Budget 2022 are as follows:

Major Economic Announcements

  •  India’s economic growth estimated at 9.2% to be the highest among all large economies.
  • 60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors.
  • PLI Schemes have the potential to create an additional production of Rs 30 lakh crore.
  • Entering Amrit Kaal, the 25 year long lead up to India @100, the budget provides impetus for growth along four priorities:
  • PM GatiShakti
  • Inclusive Development
  • Productivity Enhancement & Investment, Sunrise opportunities, Energy Transition, and Climate Action.
  • Financing of investments

PM GatiShakti

  • The seven engines that drive PM GatiShakti are Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure.

PM GatiShakti National Master Plan

  • The scope of PM GatiShakti National Master Plan will encompass the seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency.
  • The projects pertaining to these 7 engines in the National Infrastructure Pipeline will be aligned with PM GatiShakti framework.

Road Transport

  • National Highways Network to be expanded by 25,000 Km in 2022-23.
  • Rs 20,000 Crore to be mobilized for National Highways Network expansion.

Multimodal Logistics Parks

  • Contracts to be awarded through PPP mode in 2022-23 for implementation of Multimodal Logistics Parks at four locations.

Railways

  • One Station One Product concept to help local businesses & supply chains.
  • 2,000 Km of railway network to be brought under Kavach, the indigenous world class technology and capacity augmentation in 2022-23.
  • 400 new generation Vande Bharat Trains to be manufactured during the next three years.
  • 100 PM GatiShakti Cargo terminals for multimodal logistics to be developed during the next three years.

Parvatmala

  • National Ropeways Development Program, Parvatmala to be taken up on PPP mode.
  •  Contracts to be awarded in 2022-23 for 8 ropeway projects of 60 Km length.

Inclusive Development

Agriculture

  • Rs. 2.37 lakh crore direct payment to 1.63 crore farmers for procurement of wheat and paddy.
  • Chemical free Natural farming to be promoted throughout the county. Initial focus is on farmer’s lands in 5 Km wide corridors along river Ganga.
  • NABARD to facilitate fund with blended capital to finance startups for agriculture & rural enterprise.
  • ‘Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides and nutrients.

Ken Betwa project

  • 1,400 crore outlay for implementation of the Ken – Betwa link project.
  • 9.08 lakh hectares of farmers’ lands to receive irrigation benefits by Ken-Betwa link project.

MSME

  • Udyam, e-shram, NCS and ASEEM portals to be interlinked.
  • 130 lakh MSMEs provided additional credit under Emergency Credit Linked Guarantee Scheme (ECLGS)
  • ECLGS to be extended up to March 2023.
  • Guarantee cover under ECLGS to be expanded by Rs 50,000 Crore to total cover of Rs 5 Lakh Crore.
  • Rs 2 lakh Crore additional credit for Micro and Small Enterprises to be facilitated under the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
  • Raising and Accelerating MSME performance (RAMP) programme with outlay of Rs 6,000 Crore to be rolled out.

Skill Development

  • Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) will be launched to empower citizens to skill, reskill or upskill through on-line training.
  • Startups will be promoted to facilitate ‘Drone Shakti’ and for Drone-As-A-Service (DrAAS).

Education

  • ‘One class-One TV channel’ programme of PM eVIDYA to be expanded to 200 TV channels.
  • Virtual labs and skilling e-labs to be set up to promote critical thinking skills and simulated learning environment.
  • High-quality e-content will be developed for delivery through Digital Teachers.
  • Digital University for world-class quality universal education with personalised learning experience to be established.

Health

  • An open platform for National Digital Health Ecosystem to be rolled out.
  • ‘National Tele Mental Health Programme’ for quality mental health counselling and care services to be launched.
  • A network of 23 tele-mental health centres of excellence will be set up, with NIMHANS being the nodal centre and International Institute of Information Technology- Bangalore (IIITB) providing technology support.

Saksham Anganwadi

  • Integrated benefits to women and children through Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0.
  • Two lakh anganwadis to be upgraded to Saksham Anganwadis.

Har Ghar, Nal Se Jal

  • Rs. 60,000 crore allocated to cover 3.8 crore households in 2022-23 under Har Ghar, Nal se Jal.

Housing for All

  • Rs. 48,000 crore allocated for completion of 80 lakh houses in 2022-23 under PM Awas Yojana.

Prime Minister’s Development Initiative for North-East Region (PM-DevINE)

  • New scheme PM-DevINE launched to fund infrastructure and social development projects in the North-East.
  • An initial allocation of Rs. 1,500 crore made to enable livelihood activities for youth and women under the scheme.

Vibrant Villages Programme

  • Vibrant Villages Programme for development of Border villages with sparse population, limited connectivity and infrastructure on the northern border.

Banking

  • 100 per cent of 1.5 lakh post offices to come on the core banking system.
  • Scheduled Commercial Banks to set up 75 Digital Banking Units (DBUs) in 75 districts.

e-Passport

  • e-Passports with embedded chip and futuristic technology to be rolled out.

Urban Planning

  • Modernization of building byelaws, Town Planning Schemes (TPS), and Transit Oriented Development (TOD) will be implemented.
  • Battery swapping policy to be brought out for setting up charging stations at scale in urban areas.

Land Records Management

  • Unique Land Parcel Identification Number for IT-based management of land records.

Accelerated Corporate Exit

  • Centre for Processing Accelerated Corporate Exit (C-PACE) to be established for speedy winding-up of companies.

Direct Taxes

To take forward the policy of stable and predictable tax regime:

  • Vision to establish a trustworthy tax regime.
  • To further simplify tax system and reduce litigation.

Introducing new ‘Updated return’

  • Provision to file an Updated Return on payment of additional tax. 
  • Will enable the assessee to declare income missed out earlier.
  • Can be filed within two years from the end of the relevant assessment year.

Cooperative societies

  • Alternate Minimum Tax paid by cooperatives brought down from 18.5 per cent to 15 per cent.
  • To provide a level playing field between cooperative societies and companies.
  • Surcharge on cooperative societies reduced from 12 per cent to 7 per cent for those having total income of more than Rs 1 crore and up to Rs 10 crores.

Tax relief to persons with disability

  • Payment of annuity and lump sum amount from insurance scheme to be allowed to differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardian attaining the age of 60 years.

Parity in National Pension Scheme Contribution

  • Tax deduction limit increased from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees.
  • Brings them at par with central government employees. 
  • Would help in enhancing social security benefits.

Incentives for Start-ups

  • Period of incorporation extended by one year, up to 31st March, 2023 for eligible start-ups to avail tax benefit.
  • Previously the period of incorporation valid up to 31st March, 2022.

Incentives under concessional tax regime

  • Last date for commencement of manufacturing or production under section 115BAB extended by one year i.e. from 31st March, 2023 to 31st March, 2024.

Scheme for taxation of virtual digital assets

  • Specific tax regime for virtual digital assets introduced.
  • Any income from transfer of any virtual digital asset to be taxed at the rate of 30 per cent.
  • No deduction in respect of any expenditure or allowance to be allowed while computing such income except cost of acquisition.
  • Loss from transfer of virtual digital asset cannot be set off against any other income.
  • To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.
  • Gift of virtual digital asset also to be taxed in the hands of the recipient.

Litigation Management

  • In cases where question of law is identical to the one pending in High Court or Supreme Court, the filing of appeal by the department shall be deferred till such question of law is decided by the court.
  • To greatly help in reducing repeated litigation between taxpayers and the department.

Tax incentives to IFSC

  • Subject to specified conditions, the following to be exempt from tax
  • Income of a non-resident from offshore derivative instruments.
  • Income from over-the-counter derivatives issued by an offshore banking unit.
  • Income from royalty and interest on account of lease of ship.
  • Income received from portfolio management services in IFSC.

Rationalization of Surcharge

  • Surcharge on AOPs (consortium formed to execute a contract) capped at 15 per cent.
  • Done to reduce the disparity in surcharge between individual companies and AOPs.
  • Surcharge on long term capital gains arising on transfer of any type of assets capped at 15 per cent.
  • To give a boost to the startup community.

Health and Education Cess

  • Any surcharge or cess on income and profits not allowable as business expenditure.

Deterrence against tax-evasion

  • No set off, of any loss to be allowed against undisclosed income detected during search and survey operations.

Rationalizing TDS Provisions

  • Benefits passed on to agents as business promotion strategy taxable in hands of agents.
  • Tax deduction provided to person giving benefits, if the aggregate value of such benefits exceeds Rs 20,000 during the financial year.

Indirect Taxes

Remarkable progress in GST

  • GST revenues are buoyant despite the pandemic – Taxpayers deserve applause for this growth.

Special Economic Zones

  • Customs Administration of SEZs to be fully IT driven and function on the Customs National Portal – shall be implemented by 30th September 2022.

Customs Reforms and duty rate changes

  • Faceless Customs has been fully established. During Covid-19 pandemic, Customs formations have done exceptional frontline work against all odds displaying agility and purpose.

Project imports and capital goods

  • Gradually phasing out of the concessional rates in capital goods and project imports; and applying a moderate tariff of 7.5 percent – conducive to the growth of domestic sector and ‘Make in India’.
  • Certain exemptions for advanced machineries that are not manufactured within the country shall continue.
  • A few exemptions introduced on inputs, like specialised castings, ball screw and linear motion guide – to encourage domestic manufacturing of capital goods.

Review of customs exemptions and tariff simplification

  • More than 350 exemption entries proposed to be gradually phased out, like exemption on certain agricultural produce, chemicals, fabrics, medical devices, & drugs and medicines for which sufficient domestic capacity exists.
  • Simplifying the Customs rate and tariff structure particularly for sectors like chemicals, textiles and metals and minimise disputes; Removal of exemption on items which are or can be manufactured in India and providing concessional duties on raw material that go into manufacturing of intermediate products – in line with the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.

Sector specific proposals

Electronics

  • Customs duty rates to be calibrated to provide a graded rate structure – to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.
  • Duty concessions to parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items – To enable domestic manufacturing of high growth electronic items.

 Gems and Jewellery

  • Customs duty on cut and polished diamonds and gemstones being reduced to 5 per cent; Nil customs duty to simply sawn diamond – To give a boost to the Gems and Jewellery sector
  • A simplified regulatory framework to be implemented by June this year – To facilitate export of jewellery through e-commerce.
  • Customs duty of at least Rs 400 per Kg to be paid on imitation jewellery import – To disincentivise import of undervalued imitation jewellery.

Chemicals

  • Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining being reduced; Duty is being raised on sodium cyanide for which adequate domestic capacity exists – This will help in enhancing domestic value addition.

MSME

  • Customs duty on umbrellas being raised to 20 per cent. Exemption to parts of umbrellas being withdrawn.
  • Exemption being rationalised on implements and tools for Agri-sector which are manufactured in India
  • Customs duty exemption given to steel scrap last year extended for another year to provide relief to MSME secondary steel producers
  • Certain Anti- dumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked – to tackle prevailing high prices of metal in larger public interest.

Exports

  • To incentivise exports, exemptions being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes.
  • Duty being reduced on certain inputs required for shrimp aquaculture – to promote its exports.

Government of India’s Preventive Measure for Corporates | Reporting to Ministry of Corporate Affairs (MCA)

The Novel Coronavirus (COVID-19) has affected over 110 countries, including India. Accordingly, taking cognizance of the gravity of the public health situation and in order to generate greater awareness and confidence on our state of readiness, Ministry of Corporate Affairs (MCA), Government of India, has today i.e. on 23rd March, 2020 deployed the attached notification ‘CAR (Company Affirmation of Readiness towards COVID-19)′. In view of this, every Company is required to report compliance using the above-mentioned web Form from 23rd March, 2020 onwards at the earliest convenience.

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