TAX PICKINGS (PSUs AS COMPARABLES WHEN APPLYING CUP METHOD OF TRANSFER PRICING)

The Comparable Uncontrolled Price (CUP) method is one of the five main transfer pricing methods. It’s used to ensure transactions between related companies are comparable in price to those conducted with unrelated organizations.

It has been consistently held by the ITATs across the country that government companies/PSUs could not be considered to be a comparable for the reason that the contracts between public sector undertakings are not driven by profit motive along but other considerations also weigh in such as discharge of social obligations etc. The view has also been upheld by the Hon'ble High Court of Bombay in CIT v. Thyssen Krupp Industries India Pvt. Ltd. [2016] 385 ITR 612( Bom) ; [2016] 68 taxmann.com 248 (Bom).

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