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I-T orders legal proceedings against Marsh India

Dept orders a penalty of Rs 4.84 cr and initiates legal proceedings against company

Read more on:    Insurance | Marsh India | Income Tax
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The income-tax (I-T) department has ordered a penalty of Rs 4.84 crore and will initiate further legal proceedings against Brokers, a joint venture of US-based Marsh USA and Marsh India. Marsh India is facing transfer pricing charges for transferring large sums of money out of India to associate enterprises in low-tax regimes.

The I-T department assessed Marsh India's books for assessment year 2010-11. During the period, Marsh India had posted an operating income and profit of Rs 62.33 crore and Rs 17.8 crore, respectively, against Rs 52.07 crore turnover in assessment year 2008-09. In assessment year 2010-11, Marsh India reported total income from international transactions at Rs 20.29 crore.

The department said looking from the balance sheet, the company was to receive Rs 7.29 crore from debtors, of which Rs 1.53 crore was receivable from its associate enterprises as on March 31, 2010. The department issued a show-cause notice asking why notional interest at 12 per cent could not be calculated on the outstanding balance form the associate enterprises.

Marsh India said, "In connection with this query raised by the department, we are working with them to resolve this quickly. In the consulting sector, there is no custom to charge interest on delayed receivables. Unlike a trader, a consultant does not normally have a contractual right to receive interest on delayed receivables. Even where a right is available, it has not come across instances where a consultant has charged the client interest on delayed receivables. It is only where the matter travels to the court and the court grants interest that a consultant actually receives such interest. Transfer pricing does not and cannot contemplate an adjustment which would result in a transaction that would be outside the ordinary court of business."

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