Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: form 3cd :: list of goods taxed at 4% :: cpt :: articles on VAT and GST in India :: VAT RATES :: ACCOUNTING STANDARD :: ACCOUNTING STANDARDS :: due date for vat payment
 
 
« General »
 Banks will have a hard slog ahead to get GST-ready
 Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956
 Introduce indemnity clauses with suppliers on tax compliance: Expert
 While filing tax in India, NRIs do not have to report overseas assets
  Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956 -reg.
 SH. VISHWA NATH GUPTA Vs. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL, KANPUR AND ANR.
 No tax scrutiny of big transaction if it matches income
 Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956 -reg.
  Home loan tax reliefs often missed by taxpayers
 Income tax department launches online facility for linking Aadhaar and PAN
 Home loan tax reliefs often missed by taxpayers

We'll tell you what your expenses weren't: CBDT
December, 23rd 2011

I-T transfer pricing wing disallows tax deductions sought by MNCs India arms.

How much should the Indian arm of Sony be charging its parent corporation for marketing its products? Or Suzuki Motor of Japan get from Maruti Suzuki here for use of its brand name?

If your answer is whatever they decide internally, the Central Board of Direct Taxes begs to differ. Or, rather, insists on differing whether the arms like it or not. At stake is a hell of a lot of money.

In the case of Sony India, for instance, the CBDT foxhound in question has proposed, in recent orders for the 2008-09 assessment year, adjustment of income upwards by as much as Rs 121.9 crore on account of the advertising and marketing promotion (AMP) expenses in 2007-08.

Theres a similar enhancement in income of Rs 311.9 crore of AMP deductibles for Maruti Suzuki and another addition of a further Rs 237 crore on payment of royalty for use of the Suzuki brand name. BMW India has been told to forget the idea of explaining why its like AMP expenses should be a lot lower the taxman has raised their taxable income for the year 2007-08 by Rs 48.7 crore.

The issue
Transfer pricing is the economists term for what is paid when goods or services are sold between different divisions of the same company or different companies within a group. One consequence of the economys globalisation, with every major and medium enterprise eager to become a multinational corporation or join hands with one, is to make this exercise hugely livelier than in earlier decades. And, with state treasury mandarins permanently on a hunt for ways to collar more revenue, the transfer pricing department of CBDT has little time or inclination for leisure.

Whence these huge adjustments in AMP and other expenses claimed by these companies as tax deductibles. Transfer pricing rules in most countries are based on what is referred to as the arms length principle to establish transfer prices based on an analysis of pricing in comparable transactions between two or more unrelated parties dealing at arms length The rules permit related parties to set prices in any manner but it is then the job of tax authorities to compare what is charged with prices or measures of profitability for transactions between unrelated entities. In the process, determining what is or what ought to be arms length.

How it works
The result is a feast for tax lawyers and rule drafters-cum-arguers. In each such case, the transfer pricing officer in question declares the calculations offered in defense as unacceptable , having exceeded as compared to the uncontrolled comparable as the edict goes in the case of Sony India here, with much more on these lines. In effect, deductible(s) disallowed, pay up. The department in question has made similar upward adjustments in the case of at least a dozen more majors, across the electronics, footwear, mobile (Nokia India has been told to consider its taxable income Rs 431 crore higher for the year in question), consumer goods and other sectors.

TAXING TIMES
Transfer pricing additions in income for assessment year 2008-09
Company AMP Adjustment* Total Adjustment
Sony India 1,218,822,482 1,218,822,482
BMW India 486,529,022 486,529,022
Maruti Suzuki 3,118,800,000 5,491,242,202
Nokia India 3,728,601,144 4,310,815,993
*Advertisement and marketing promotion.  (Figures in Rs cr) Source: Transfer Pricing Orders

The companies in question did not reply to email sent to them by Business Standard for their comments on the adjustments made by the transfer pricing department. They have contested their respecive cases with the transfer pricing office. TP consultant Tarun Chaturvedi said after the TPO order, the assessing officers in question would formally issue the tax demands, which the companies can either accept or go to the dispute resolution mechanism, where the time taken to decide is within nine months. After which, the company pays or appeals to the tax tribunal. He says in a majority of cases, the outcome has gone against the companies.

The income tax department and its counterpart in charge of indirect taxes are under urgent orders to scramble for more revenue to plug an alarming fiscal deficit. And, say tax experts, transfer pricing adjustments have become a focus area of the I-T tax department for raising more this year.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions