Assuring a non-adversarial tax regime in the economy to attract foreign investment, the government on Thursday streamlined assessment of transfer pricing cases to prevent harassment of taxpayers.
In a guidance note issued to income tax officers, Central Board of Direct Taxes guided against manual picking of cases and underlined that that the cases be picked up for scrutiny only through computer-assisted selection process (CASS). Besides, the note suggested that a tax officer should refer cases to a transfer-pricing officer only in three defined circumstances and where there is income or potential income arising from international transactions.
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The note said a tax officer will be able to refer cases to a transfer-pricing officer on three counts, including on finding that the taxpayer did not report an international transaction or a specified domestic transaction in the filing. Also in a case where an appeal is pending on the matter related to transfer pricing adjustment of Rs 10 crore or above of last year.
The officer could refer the case to the transfer-pricing officer if transfer-pricing issues have been identified in search or seizure. The instruction pointed out that if the case involving transfer pricing is not referred, then the officer shall not determine the arm's length price in any circumstance.
"This is yet another move which would boost taxpayer confidence and would go a long way in establishing a non-adversarial tax regime for multinationals operating in India. This instruction could be seen as one of the biggest game changers for Indian transfer pricing litigation," said Amit Agarwal, transfer pricing partner at Nangia & Co.