Transfer pricing adjustment on business support cost sent back for fresh verification of mark-up inclusion in invoiced amounts.

Transfer pricing adjustment on business support cost could not be conclusively upheld or discarded on the record as the invoice and supporting workings did not show any bifurcation of direct cost, business support cost, or the mark-up applied. The assessee claimed that the invoice to the associated enterprise already included 12% mark-up on all costs, but the material produced did not substantiate that claim. The matter was therefore restored to the Commissioner (Appeals) for fresh adjudication after giving the assessee an opportunity to produce proper evidence showing that all costs had been remunerated with the stated mark-up.

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Issues: Whether the transfer pricing adjustment on account of business support cost was sustainable, and whether the assessee had shown that the invoice raised on the associated enterprise already included mark-up on all costs, including business support cost.

Analysis: The service-charge schedule indicated two categories of cost, namely direct cost for programme production and business support cost comprising indirect and overhead expenses, with separate mark-up provisions. However, the single invoice produced did not show any bifurcation of direct cost, business support cost, or the mark-up applied thereto, and no working was furnished to demonstrate that the invoice amount included 12% mark-up on all costs. In the absence of complete supporting material, the claim could not be conclusively accepted, though it could not be rejected outright without giving the assessee an opportunity to substantiate it with proper evidence.

Conclusion: The issue was restored to the file of the Commissioner (Appeals) for fresh adjudication after affording due opportunity to the assessee to prove that all costs had already been remunerated with 12% mark-up.

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