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CBDT makes transfer pricing scrutiny transparent
September, 01st 2015

The income-tax department has reorganised the criteria of transfer pricing cases for manual selection for scrutiny of tax returns to bring it in line with international tax practices.

Transfer pricing cases where the I-T department has added at least Rs 10 crore to tax charged over the declared transaction of Indian subsidiaries and their multinational parents in the past assessment years will be compulsorily scrutinised.

Transfer pricing is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise.

In the guidelines for fiscal 2015-16, issued by the Central Board of Direct Taxes (CBDT), all the cases where there is an addition of Rs 10 crore or more to the tax over the previous year will come under tax scrutiny.

In 2013-14 transactions of Rs 15 crore and above were compulsorily scrutinised, but there were no norms for this in the last fiscal.

"This time the criteria would be more focused and help reduce litigation, it will reduce the number of cases," a senior assessing officer told dna.

"It is a positive and proactive step. The government is trying to bring clarity and certainty in the taxation issues which was much needed," Rakesh Nangia, managing partner of Nangia & Co, told dna.

The norms have been rationalised for individual incomes, with some additions and deletions; for instance, cases where the I-T department adds Rs 10 lakh or more to the income over previous year would be picked up for scrutiny.

Among other changes in this year's guidelines, CBDT has spared those assessments pertaining to 'survey' where books of accounts, documents etc were not impounded and returned income is not less than returned income of preceding assessment year.

Further, the cases which are cancelled or permission was not granted by the concerned commissioner (CIT) or the order was been reversed in appellate proceedings will not be selected for scrutiny.

In case of information received from other government departments pointing to tax evasion, compulsory scrutiny will be initiated only if the information is specific and verifiable.

"The assessing officer shall record reasons and take prior approval from jurisdictional concerned before selecting respective cases," it said.

An assessee has a four-stage grievance redressal and litigation mechanism available beginning with an appeal to the Commissioner of I-T Appeals called CIT (A), further up to the ITAT and subsequently to the high court.

According to the I-T department data, a tax demand of more than Rs 4 lakh crore is under dispute and litigation before various courts and appellate authorities.

According to tax experts, this will speed up the legal disposal system in the department. Also, it will unlock the revenues stacked in such cases since decades.

"Cases are also being selected under Computer Aided Scrutiny Selection, on the basis of broad-based selection filters. A list of such cases shall be separately intimated in due course by the department to the jurisdictional authorities concerned," said the order.

CBDT has asked field officers to share details of at least 50 quality assessment.

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