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: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: empanelment :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT Audit :: ACCOUNTING STANDARDS :: articles on VAT and GST in India :: due date for vat payment :: form 3cd :: cpt :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: VAT RATES
« Transfer Pricing »
 EY Azerbaijan holds seminar on transfer pricinga
 India among top 3 investment destinations over medium term
 India notifies amended tax treaty with Singapore
 Rollback provision available in respect of bilateral advance pricing agreement under the India-Korea DTAA
 Advance pricing agreement with rollback provision from April 1 under India-Korea DTAA
  India among the top three nations where transfer pricing policies faced official examination
 World Tax and World Transfer Pricing submissions open
 African Tax Officials Receive Transfer Pricing Training
 India-Russia spar over pricing and transfer of tech in Kamov copters
 Highlights Of Recent Amendments In The Communiqué Concerning The Mergers And Acquisitions
 New transfer pricing decree: a step closer to international standards

Clear the confusion on transfer-pricing norms
February, 27th 2015

The government has been able to instil a positive sentiment in the country. Various policy initiatives like Make-in-India, aimed to make India a manufacturing hub, and the Clean India campaign; updating age-old laws and tweaking the Goods and Services Tax to a more acceptable form, introducing greater clarity in the Companies Act, 2013; and tax developments like the high court rulings on Vodafone and Shell in the share valuation matter and the announcement of advance pricing agreement (APA) rollback mechanism and the recomposition of the Dispute Resolution Panels (DRPs)—the government has been aiming to give a face-lift to the overall Indian tax environment.
From a transfer-pricing perspective, three broad need further attention.

First, as the roll-back mechanism was applicable to APAs closed after October 1, 2014, many APAs, where the positions have been agreed upon between taxpayers and the government, have been kept on hold, as the detailed implementation rules for the APA roll-back scheme announced in the earlier budget are still awaited.

The concept of range replacing arithmetic mean is to be applied for determination of arm’s length price (ALP) from FY15. The taxpayers need clarity on how range mechanism would be implemented before their financials are closed in March 2015.

Acceptance of multiple-year data also needs to be imbibed in the TP regulations to give a clear direction to the taxpayers and tax authorities. This will can curtail lot of disputes that arise due to adoption of single-year data.

Second, though the controversy regarding valuation of shares issued has been put to rest by the press release issued by the government, there is a need for a clarificatory amendment in the TP regulations providing that TP will not be applicable to transactions where an income does not arise. This will go a long way in curbing litigation and enabling the tax authorities to focus on more important incidences of tax base erosion.

Intangibles have also been at the centre of another controversy and have been debated and litigated upon extensively. It has been alleged by the authorities that the Indian taxpayers should be compensated for excessive advertising, marketing and promotion expenditures, as it constitutes further development of marketing intangibles owned by overseas affiliates and provision of services. We still await the ruling of the Delhi High Court on this issue. Further, since the definition of international transactions (marketing and other intangibles) expanded retrospectively from the inception of Indian TP regulations, clear guidelines are required in TP regulations to recognise certain methodologies and approaches for evaluating the ALP of transactions involving intangibles. The recommendations made by Organization for Economic Co-operation and Development (OECD) under the Base Erosion and Profit Shifting (BEPS) Action Plan 8 could be adopted. BEPS recommendations endorse that location savings is not an intangible; however, the Indian tax authorities are aiming to use the profit-split method to realise this concept. Clarity that location savings is embedded in the ALP of Indian comparables must be provided in the regulations, in line with recent judgement of the Mumbai Tribunal in the case of Watson Pharma.

There is also a need for detailed valuation norms for issue of equity shares, which are currently embedded only in exchange control regulation with a different objective. Further valuation methodology based on income or discounted cash flow method may be prescribed for valuation of intangibles.

Though the government has introduced lot of avenues like APA, safe harbour rules and now independent and autonomous DRPs to limit the TP litigation ratio, it is important that the transfer-pricing officers (TPOs) conducting the first level audits adopt a more pragmatic approach by giving due consideration to business and commercial realities than purely being driven by profitability of the taxpayer.

Based on the re-establishment of ties between Indian and American authorities, if a significant number of mutual agreement procedures (MAPs) pending over years are closed soon, it may reduce the disappointment faced by the MNCs and restore their confidence in the Indian tax regime.

Significant changes in the TP regulations will take time, but while the finance ministry is gearing up to deliver new proposals and guidelines in the upcoming budget, it is important that the awaited clarity and guidance on some of the imminent matters is provided.

As announced by the finance minister at Davos, it is imperative to have a TP regime that is non-adversarial, instils global confidence in India, and ultimately boosts economic growth.

With inputs from Anuradha Rathod
The author is Partner & National Head (Global Transfer Pricing Services) KPMG India. Views are personal

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

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