The tax courts in India have been increasingly attempting to
provide clarity on recurring transfer pricing issues such as
payment of royalty, functional characterization, etc. This edition
of the newsletter, we bring you key findings of the Delhi High
Court (HC) on long drawn issue of categorizing the taxpayer
services as Knowledge Process Outsourcing (KPO) or Business Process
Outsourcing (BPO) wherein the HC on the perusal of the agreement
categorizes the activities of the taxpayer to be in the nature of
KPO services. In the same case, on the issue of overdue outstanding
receivables, the HC has distinguished delay in receivables from
associated enterprise to be independent of the transaction of
provision of service, requiring a separate benchmarking and
compensation to the taxpayer. This ruling is alarming to all
multinational enterprises, requiring them to give attention to
delay in receivables from associated enterprises at the time of
transfer pricing certification
