In the case of DCIT v. Innodata Isogen India Pvt. Ltd. [ITA 1528/Del/2011], the Delhi Bench of the Income Tax Appellate Tribunal upheld a decision of the Commissioner of Income Tax (Appeals) to allow the taxpayer to use multiple-year data in determining the arm’s length price, given that the taxpayer’s case was directly covered under a proviso to Rule 10B (4) of the Income Tax Rules, 1962.
The tribunal found that considering the project-based income model of the taxpayer pursuant to which the customer price was agreed up-front for a fixed number of years and the margins fluctuated on a year-to-year basis, the use of multiple-year data allowed for an accurate and true reflection of the arm’s length nature of the transfer prices.
