Global

Details

  • Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 1/10/2013

India - Discounted cash-flow preferred in benchmarking share transfers  

January 10: The Chennai Bench of the Income-tax Appellate Tribunal held that the discounted-cash-flow method is preferable to the use of the Competition Commission of India (CCI) guidelines in determining the arm’s length price for the sales of shares. Ascendas (India) Private Ltd. v. DCIT, (ITA NO. 1736/Mds/2011)

The tribunal held that the valuation of shares based on the CCI guideliens (as required under the then-applicable Foreign Exchange Management Act) regulations) was for a different purpose, and could not be transposed into a pricing methodology prescribed for determining the arm’s length price of shares for transfer pricing purposes.


Also, for purposes of valuation under the discounted cash flow (DCF) method, the tribunal rejected the discount for illiquidity of shares on the basis that the discounting rate will take into account all associated risks, and no further adjustment for any risk factors was called for.


Read a January 2013 report [PDF 204 KB] prepared by the KPMG member firm in India: DCF preferable over CCI for TP benchmarking for transfer of shares



Contact a tax professional with KPMG's Global Transfer Pricing Services.




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