India has resolved 35 tax disputes with US-based multinational companies in the software development and services sector (IT and ITeS) in consultation with the US Internal Revenue Service (IRS) on how to apportion their income from Indian operations between the two countries for taxation.
A statement from the finance ministry said in New Delhi that another 100 tax disputes are likely to be resolved in the next three months. This was made possible under a framework agreement signed between the two nations recently.
“About 200 past transfer pricing disputes between the two countries in information technology services and information technology-enabled services segments are expected to be resolved under this agreement during the current year,” the statement said, calling it a major positive development in tax dispute resolution.
The statement did not give details of the tax disputes or the companies involved. Most of the large US-based software companies having contract research and development operations in India have faced tax disputes on how much of the local arms’ revenue from services to the offshore parent is taxable in India.
To reduce tax litigation, the government is also signing agreements with large companies on the principles of calculating the taxable income arising from their local operations.