Select Your Location
Transactions of related parties have always been looked at by the Income tax department with embowed view. The Income Tax Act, 1961 contains provisions, which govern the transactions between related parties.
The Act further requires the Indian party to such cross border transactions to maintain proper documents and information in support of cross border transactions, so as to assist the Income Tax Department in ascertaining the Arm’s Length Price of such transaction.
Table of Contents
An expert under the Chairmanship of Mr. Raj Narain, was set up by the Government in November 1999, to study global transfer pricing practices, and inspect the requirement for an extensive transfer pricing enactment in India. Due to these recommendations of the Group, the presented new move valuing arrangement in the Union Budget for the year 2001-02. The Indian enactment is extensively in accordance with the OECD Guidelines, and has consolidated certain facts of the legislation of different nations, for example, China and Korea.
The objective behind the introduction of the new provisions was explained by the Finance Minister in his Budget Speech, and in the Memorandum explaining the provisions of the Finance Act,2001. The same are extracted below:
“The presence of Multinational enterprise in India and their ability to allocate profits in different jurisdictions by controlling prices in intragroup transactions has made the issue of transfer pricing a matter of serious concern.
The Price Charged in a Transaction between Unrelated Parties
The Price Charged In Transaction Between The Associated Enterprise
Concept of TP
Transaction of sale and purchase between two domestic companies (Indian) which are subject to the same rate of marginal tax rate, would not lead to any tax advantage to either of them.
The case of GLAXO Smithline resulted in the need of amendment of transfer pricing provision in India.
Glaxo SmithKline Case
The Memorandum explaining the provisions of the Finance Bill, 2012 refereed to the decision of Supreme Court CIT-IV, Delhi v Glaxo SmithKline Asia (P) Ltd, where the Supreme Court made certain observations regarding the need for an amendment in the transfer pricing provisions in certain domestic transactions.
“the Supreme Court in the case of CIT v GlaxoSmithKline Asia (P) Ltd, in its order has, after examining the issues arising where related parties, suggested that Ministry of Finance should consider appropriate provisions in law to make transfer pricing regulations applicable to such related party domestic transactions”
It has been viewed by the Supreme Court
In India, transfer pricing is turned out to be fruitful ground for several controversies. The early phase of regulations and absence of clarity on different interpretational issues combined with lack of legal reasonability have regularly left the taxpayers and Revenue experts at odds. The intent of this part is to basically assess the existing regulations, and highlights the key controversies that have developed few years of the transfer pricing audits.
The utilization of single year information and arithmetic mean intend to process ALP had made the TP Controls characteristically unbending. Further, it was unimaginable for taxpayers to discover equivalent companies announcing information of the present year to perform out a significant comparability examination inside the prescribed courses of time limit.
An advance Pricing Agreement is a binding written agreement between company and the tax authority. Most countries have the facility for a group to obtain an advance ruling that pricing policies will be regarded as being arm’s length. This gives greater certainty than waiting for the tax authority to object to prices charged at a later date.
In recent years, ȾP has been a major cause of dispute between the Indian tax authorities and MNEs. ȾP audits in India have consistently resulted in large tax demands and protracted litigation. CBDT issued different guidelines to work out ȾP provisions and to give procedural consistency to Indian Tax Authorities. Further, the Indian Government formed an alternative dispute mechanism called as Dispute Resolution Panel under the current arrangements of the IT Act to resolve the disputes identifying with TP international transaction.
ADOPTION OF COMPUTING METHODS LIKE:
Read our article:Transfer pricing provision in India
She is B.Com (H), LL.B LLM, Cs (Module 2) And Certification In Cyber Law From ILI Qualified. She has Been A Legal Teacher In The Previous Organization. My Strength Is My Expertise Knowledge In Civil Laws, Corporate Law And Tax Laws. I Have Been Legal Teacher And Legal Trainer In The Past Organization. Her Knowledge About The Subjects Have Expanded Due To Teaching Number Students From Various Universities All Over India.
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Are you human?: 3 + 9 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Companies encourage intra-company commerce and purchasing between divisions in order to optimize profits and improv...
22 Mar, 2022
The multinational corporations engage in multiple transactions among its entities in multiple jurisdictions. These...
15 Feb, 2022
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!