1. Quality tax advice, globally Case Studies on TP Methodologies Case Study 1

2. 1 CASE I A Co. sells goods to B Co. (AE) at USD 10 per unit A Co. sells same goods to C Co. at USD 6 per unit A Co. B Co. C Co. Associated enterprises Third parties Which method would apply? __________________________________________________________________________

3. 2 DOES YOUR ANSWER CHANGE? If A Co sells 50 units to B Co and 1,500 units to C Co? If goods sold to B Co are branded and goods sold to C Co are unbranded? If credit period given to B Co is 90 days and credit period to C Co is 15 days? __________________________________________________________________________

4. 3 CASE II B Co. purchases Televisions from A Co. (AE) at USD 300 per unit B Co. resells the same to C Co. at USD 360 per unit A Co. B Co. C Co. Associated enterprise Third party 300 360 Which method would apply? __________________________________________________________________________

5. 4 DOES YOUR ANSWER CHANGE? If reliable data for computation of gross margin is not available for comparable companies? If the business model for carrying out trading is different eg B Co. undertakes wholesale trading and comparable companies undertake retail trading? If data for television distributors is not available in public domain and independent companies are engaged in trading of electronic goods? __________________________________________________________________________

6. 5 CASE III A Co. provides customized software solutions to end customers in US A Co. subcontracts the software development work to B Co. in India (AE) B Co. operates as a captive unit performing software development services only for A Co. A Co. B Co. End customers Associated enterprises Provision of software development services Software sales to third parties Which method would apply? __________________________________________________________________________

7. 6 CASE IV A Co. purchases raw materials from third party vendors in China for USD 10 per unit A Co. undertakes the manufacturing process and sells the finished goods to B Co. (AE) at USD 14 per unit B Co. A Co. Third party vendors Associated enterprises Sale of finished product 14 Purchase of raw material 10 Which method would apply? How would you apply this method? __________________________________________________________________________

8. 7 CASE V A Co. is a shipping company that owns commercial vessels. A Co. charters a vessel to B Co. at USD 1000 per day. B Co. operates in the Oil and Gas industry and undertakes extraction activities. B Co. uses the vessel for laying of underwater pipelines. A Co. B Co. Associated enterprises Charter of vessel Which method would apply? __________________________________________________________________________

9. 8 CASE VI A Co. and B Co. are associated enterprises operating in the pharmaceutical sector For development of a specialized drug, both companies together undertake the research and development activities They share the capital cost as well as personnel to undertake research and development activities. The knowhow / process patent shall be owned by both. A Co. B Co. R&D Which method would apply? How would you apply this method? __________________________________________________________________________

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