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 »
 New direct tax code may have to wait until 2019
 New direct tax code may have to wait until 2019
 New direct tax code may have to wait until 2019
 New direct tax code may have to wait until 2019
 How to use your Form 16
 Which ITR form applies to you for financial year 2017-18?
 Income tax returns filing form-2 released; should you use it? Find out
  Are you planning to file ITR 1 form? here's how to do it Income Tax Return (ITR) filing
 30 LPA-Opening Financial Controller
 ITR form 2 in java release by CBDT for return filing by individuals
 How to file your income tax return using ITR Form-1 Income Tax efiling for AY 2018-19

Breather for IT companies: CBDT withdraws a controversial circular
July, 05th 2013

In a breather to the IT industry, the Income Tax Department today announced withdrawal of a controversial circular and modification of another one relating to taxation of R&D centres, which play a key role in software development.

While the circular relating to adoption of Profit Split Method (PSM) as a preferred mode for computation of tax liability has been rescinded, another one relating to development centres will suitably be modified, said the Central Board of Direct Taxes (CBDT).

The decisions were taken following representation from the industry for greater clarity on two circulars concerning international taxation or transfer pricing.

"This is a very positive step. The compliance cost will come down and chances of double taxation may reduce," said S P Singh, Senior Director, Deloitte Haskins & Sells.

The circulars were based on a report of N Rangachary Committee on 'Taxation of Development Centres and IT Sector'.

The tax department by rescinding the circular has made sure that profit-split method (PSM), which leads to higher taxation, will not be the preferred mode, Singh said, adding that the I-T Department will use more appropriate methods depending on circumstances.

Besides PSM, there are five other methods for computing tax liability under the transfer pricing rules. These include, resale price method, cost plus method, comparable uncontrolled price method and transactional net margin method.

The circular which has been withdrawn, CBDT said, was "appeared to give the impression that there was a hierarchy among the six methods listed in section 92C and that PSM was the preferred method in the case involving unique intangibles or in multiple interrelated international transactions".

Referring to the other circular, CBDT said the use of phrases like 'cumulatively complied with', 'economically significant functions' and 'low or no tax jurisdiction' will be redefined.

"CBDT believes the rescission of circular No 2 and amendment and reissue of circular No.3 will clear all ambiguities in the matter," the CBDT added.

It further said that 'Safe Harbour Rules' are under consideration and will be issued shortly.

The Safe Harbour Rules will bring further certainty in assessment of Development Centres that are engaged in providing contract R&D services, it added.

Safe Harbour principles are international disclosure practises to check litigations in transfer pricing -- an accounting mechanism undertaken by MNCs to reduce tax liabilities.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Multimedia Presentations Multimedia Solutions 3D Solutions Corporate Presentations Business Presentations Multimedia Presentation India M

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