In an effort to deliver on his promise of offering tax certainty, Finance Minister P Chidambaram is trying to address the transfer pricing woes of multinational companies by inking a few Advance Pricing Agreements (APAs) before a new government is formed after the Lok Sabha polls in April-May.

APAs can help avoid recurrence of transfer pricing disputes between the income tax authorities and MNCs. The tax department is currently embroiled in transfer pricing rows with Vodafone and Shell.

The safe-harbour norms (provision in a statute or regulation which specifies in advance something deemed not to violate a given rule) announced in August 2013 got a lukewarm response from industry, with the finance ministry getting barely 36 applications last year. Chidambaram seems keen on closing a few APAs - a deal between taxpayer and department to decide in advance the pricing of a transaction between an MNC and its group companies in India

"We are at an advanced stage in a few APAs. Every effort is being made to close these before March 31. Wherever companies have come forward with data, we are moving ahead," said a finance ministry official, who did not wish to be identified because of the confidentiality pact with applicants.

Unlike with safe harbour, MNCs have welcomed APAs, with the department receiving 146 applications last year, of which 117 were for unilateral ones. Of these, 142 applications came in the last 15 days. A similar number, mostly for unilateral APAs, have come this year, too; the last day for applying is March 31. Unilateral APAs are between taxpayer and the tax authority in India; in bilateral APAs, the country where the parent MNC is based is also involved.

"Applications have come from all sectors, including information technology, IT-enabled services, media, manufacturing. Some cases have been resolved, some are under discussion. A draft APA agreement has to be approved by the law ministry, following which we will take it forward," said another official involved in the process.

Officials said in the cases at an advanced stage, field visits and most of the fact-finding have been done. It might take only a few more meetings with the assessee to conclude these. It is learnt the finance minister is clearing all the APA files sent to him without any delay, so that some agreements can be finalised during the tenure of the current UPA government.

"About 10-15 APAs are at an advanced stage and at least two to three unilateral APAs might be finalised in the current financial year. No country in the world has finalised APAs so soon. But everything is not in our hands. It depends on the assessee, too," said a third official.

Industry has hailed APAs as a positive step, while denouncing safe harbour, where they feel the margins set by the Central Board of Direct Taxes are "much higher" than the actual profits companies are making. Owing to a poor response, the department is considering overhaul of the safe harbour rules for next year, and a final decision will be taken by the next government. "Currently, safe harbour caters to a limited sector. It needs to include more. Second, the margins prescribed by CBDT are too high. APA is an expensive and long process but it gives you certainty. The rate agreed upon by two parties is fixed for five years," said Rakesh Nangia, managing partner with chartered accountancy firm Nangia & Co.