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Income-tax tribunal spikes Ranbaxys appeal
February, 09th 2008
In a crucial ruling pertaining to MNCs operating in India, an income-tax tribunal has held that all cross-border transactions of Rs 5 crore or more has to be referred for transfer pricing assessment.

While turning down an appeal filed by pharma major Ranbaxy Laboratories, which challenged a decision to subject the companys cross-border transactions to transfer pricing assessments, a division bench of the Income-tax Appellate Tribunal (ITAT), Delhi held that failure in referring such transactions to the transfer pricing officer is a violation of law.

The ITAT bench comprising president Vimal Gandhi and accountant member PM Jagtap held that cross-border transactions with associated enterprises need to be screened under the machinery set up for transfer pricing assessments. The bench said transfer pricing assessment is a complex job that can be best carried out by specialists assigned for the task, in this case transfer pricing officers.

The order is a reaffirmation of the policy decision by the revenue authorities that all cross-border transactions worth Rs 5 crore or more should be referred to the transfer pricing department, who are skilled in assessing the complicated transactions that involves, among other things, comparisons with similar transactions.

There was also a circular by the Central Board of Direct Taxes (CBDT) making it mandatory for all Rs 5 crore and above transaction to be assessed by Transfer Pricing Officer.

The transfer pricing division is a special cell created for the purpose of assessing cross-border transactions so that such transactions between related parties do not escape the Indian tax net.
 
 
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