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Defending transfer pricing method used by a global cosmetics company

Engagement: SKP was engaged by a leading global cosmetic company to defend the management fee charge by the foreign parent to the Indian subsidiary before the Indian transfer pricing authorities. We also had to defend the transfer pricing method used by the taxpayer against the method used by the tax authorities at the audit as well as Appellate levels.

Solution
Based on the facts of the case, OECD Guidelines, Indian Regulations and Court Rulings, our team defended the transfer pricing method used by the taxpayer. The benefit derived by the Indian subsidiary and passing the “benefit test” was demonstrated to the Indian transfer pricing authorities at various levels.

Value Delivered
There was no adjustment on account of management fees, which in earlier years had been disallowed entirely. The Appellate ordered in favour of the taxpayer, leading to huge tax savings for the client over a span of five years (and counting).