Indian Subsidiary Held To Be A Dependent Agent PE – Transfer Pricing Study Considered Inadequate

The Delhi Tribunal also held that profit attribution is required as the transfer pricing study does not adequately capture functions performed and risks undertaken by the Indian Company.

Brief Facts

• Taxpayer, a Japanese company, is engaged in the development, manufacture, assembly and supply of air-conditioning and refrigeration equipment.
• It sold air-conditioners to its wholly-owned subsidiary in India, Daikin Air-conditioning India Private Limited (DAIPL), and sold directly to Indian customers as well. In respect of direct sales in India, the taxpayer paid a commission of 10% to DAIPL.
• DAIPL, pursuant to the commission agreement, was providing marketing support services in India in respect of direct sales made by the taxpayer. The services provided inter-alia included forwarding customers request, forwarding taxpayer's quotation and contractual proposal, etc.