12. Merck Ltd

No TP adjustment on imports at lesser value under predatory pricing policy to capture market.

Facts of the case

• Merck Limited ("the Taxpayer") is in pharmaceuticals business;
• During AY 2003-04, the Taxpayer imported certain pigments from AE and paid technical know/ consultancy fees to AE for availing certain services.

During the course of the assessment proceedings for AY 2003-04, the Transfer Pricing Officer ["TPO"] rejected the comparables selected by the Taxpayer in its TP study and applied internal TNMM by considering the margin earned by the Taxpayer from AEs and non-AEs irrespective of the fact that transactions with non-AEs were not related to pigments. Therefore, TPO considered margin of non-AE segment at 16% and proposed the adjustment.