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) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« News Headlines »
 How to prepare to file ITR 1 for FY2017-18
 Step-by-step guide on how to fill ITR1
 6 steps to file income tax return online
 Want to file your income tax return online? Here’s the first step
 Good news for income tax payers! Taxmen can’t deny assessee’s legitimate claim in revised return, rules ITAT
 Can file revised return after notice issued by I-T ITAT
 How to file income tax returns online if you don't have Form 16 ITR 2018-19
 These 5 websites can help you file your ITR Income tax e-filing
 Here's why some retirees no longer have to file a tax return
 How to file different categories of ITR forms online Income tax e-filing
 Here are other documents you need to file online ITR Got your Form-16 for FY18?

Need for safe harbour provisions
July, 12th 2007
Safe harbour rules provide the circumstances in which the tax authorities would automatically accept transfer prices.

The apex courts reasoning in the Morgan Stanley case is that back-office operations do not constitute PE (permanent establishment), but for the service angle with regard to deputationists.PE refers to a fixed place of business through which the business of the enterprise is wholly or partly carried on, as Section 92F of the Income-Tax Act, 1961 defines. The term PE has been defined on the lines of the definition found in tax treati es entered into by India with other countries, states http://incometaxindia.gov.in in a page about Transfer pricing law in India. Transfer pricing, as Wikipedia educates, is the pricing of goods and services within a multi-divisional organisation, particularly cross-border transactions.

Transactions between a foreign enterprise and its PE, for example between the head office abroad and a branch in India, are subject to transfer-pricing regulations, says the taxmans site. Any income arising from an international transaction or an outgoing such as expenses or interest from the international transaction between associated enterprises should be computed having regard to the arms length price, which is the price that would be charged in the transaction if it had been entered into by unrelated parties in similar conditions, elaborates the site. Of late, OECD (Organisation for Economic Cooperation and Development) and some other tax jurisdictions are taking a position that an arms length payment cannot extinguish attribution of income to PE in all cases and in all circumstances, says Mr Samir Gandhi, Partner, Deloitte Haskins & Sells, Mumbai, in an e-mail to Business Line about the apex court decision.< /p>

While one will need to study the fineprint there is a need to appreciate the interplay between attribution of income to PE and application of transfer pricing principles. It is relevant to note that as the economic activity of an enterprise gets more complex, the tax exposure from PE perspective is minimised, but from the transfer pricing perspective increases.

Taxation of outsourcing units including the determination of arms length price has become contentious in the recent past in India, he observes. This critically depends on functions performed, assets deployed and risks assumed, explains Mr Gandhi. It is imperative to appreciate the economics of the outsourced services for resolving the intricate tax issues peculiar to outsourcing.

While outsourcing represents a great opportunity for India, it is necessary that tax issues and concerns are addressed promptly to facilitate the smooth flow of business, he says. One can consider removing uncertainties in the positions and approaches and introduce safe harbour provisions (as in Australia and Mexico) for ensuring certainty and avoiding controversies and litigation. It will be of assistance if the CBDT (Central Board of Direct Taxes) also issues administrative rulings on certain aspects and nuances, adds Mr Gandhi.

Safe harbour rules provide the circumstances in which the tax authorities would automatically accept transfer prices. The rules could, for example, require taxpayers to establish transfer prices or results as per a specific information-reporting and record-maintenance provision with regard to controlled transactions.

D. M.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Company Overview

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