Jaipur Tax Tribunal Prefects Internal CUP for Related-Party Interest and Deletes PF-ESI Disallowance

The Jaipur bench of the Income Tax Appellate Tribunal adjudicated the Uttam Bharat Electricals case, ruling that an internal comparable uncontrolled price approach factoring in brokerage is the appropriate benchmark for related-party interest transactions. Alongside this transfer pricing finding, the tribunal also ordered the complete deletion of disallowances related to employee Provident Fund and ESI payments.

This decision provides clarity on transfer pricing hierarchy, emphasizing that internal transactional data takes precedence over external market averages when available. It also aligns with judicial positions preventing the disallowance of employee welfare fund remittances when deposited prior to filing deadlines.

Tax auditors and corporate finance teams must evaluate their transfer pricing documentation to ensure internal comparable metrics are utilized where applicable. Employers should cross-check their statutory PF and ESI deposit dates against filing timelines to avoid arbitrary tax additions.