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Tell the transfer price

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Rahul

Chartered Accountnat CS

1585 Points Posted on 29 December 2013

Videsh ltd, a US company has a subsidary Hind Ltd in India. Videsh Ltd sells mobile phones to Hind Ltd for resale in Inida. Videsh Ltd also sells mobile phones to Bharat Ltd, another mobile phone seller. It sold 48000 mobile phones to Hind Ltd for Rs 12000 per uni. The price fixed for bharat ltd is Rs 11000 per unit.

The warrenty in case of sales of mobile phones by Hind Ltd is handled by itself, whereas the sale of mobile phones by Bharat Ltd, Videsh Ltd is responsible for warrenty for 6 months. Both Videsh ltd and Hind ltd extended warrenty at a standard rate of Rs 500 per annujm

on the above fcts what is the transfer price ????

Replies (1)

CA D. Singhal

490 Points Posted on 29 December 2013

Value at which one unit of mobile is tranferred by Videsh ltd. to bharat ltd( Non associated entity) = 11,000

Less: Adjustment for price of warranty not offered to Hind Ltd(Associated Entity)= (500/12)*6 = 250

Arm's Length Price/Price for an Uncontrolled transaction with Non-AE for sale of one uniot of Mobile without any undertaking of Gaurantee by Videsh Ltd = 10750.

Hence, the TP for transfer of mobiles by Videsh ltd. to hind ltd. = Rs. 10750/unit

TP for transaction of 48000 units = 10750*48000