India: Related-party Relationship Upheld by The Tribunal

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Recently, the Chennai Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of: Hospira Healthcare India Private Limited v. DCIT (ITA No. 821/Mds/2016 – AY 2011-12), held that under a provision of India’s tax law, “influence” implies dominant influence when “a person who purchased more than 1/5th of the total sales of the taxpayer would have a distinctly dominant influence on the pricing and can exercise a de facto control.” The tribunal, thus, concluded that sales to two customers constituting more than 20% of the taxpayer’s total sales constituted “dominant influence.” The related-party relationship was upheld.

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