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Income - Tax dept: CAG to review transfer pricing case
May, 13th 2011

The Income Tax (I-T) department today said that transfer pricing cases, which have revenue implications for the exchequer, will be scrutinised by the government auditor CAG.

"Transfer pricing cases will now be subject to audit by the Comptroller and Auditor General (CAG) of India," Director General of Income Tax (DGIT) RN Dash said while addressing a seminar organised by Assocham.

Multinational corporations often use transfer pricing as a tool to shift cost of input from one country to another to avoid payment of taxes in nations with high incidence of taxes. India has been trying to tighten the transfer pricing regulations to prevent tax evasion.

The CAG so far has not been auditing transfer pricing cases, which involves huge amount of revenue and often lead to litigation between the companies and the tax authorities.

Dash further said that Indian authorities are currently examining various models and incorporate the best international practices in the Direct Taxes Code (DTC) to be implemented from the next financial year.

When asked whether India should adopt OECD transfer pricing guidelines, Dash said, "OECD is an organisation of developed country. We are still importers of goods and services. We will lose revenue if we will adopt OECD transfer pricing guidelines."

Admitting the DGIT has not been taking up transfer pricing cases aggressively, he said that out of 2003 cases which were audited last year, adjustments were made in 49% cases and rest were accepted as they were.

Speaking on the occasion, PricewaterhouseCooper (PwC) National head Rahul Mitra said, "Nearly 70% of global transfer pricing litigation emanates from India."

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