The income tax department on Tuesday amended the rules regarding cross-border taxation to bring more certainty and reliability in the way officers scrutinise if MNC transactions are designed to suppress profits.
The department said that rules to assess the income of MNCs from their India operations based on the benchmark of arm’s length price have been amended in the case of both international transactions as well as specified domestic transactions.
The amended rules allow for introduction of a ‘range concept’ and use of multiple year data for tax assessment work. Accordingly, if value of a cross-border transaction within a group of companies falls within the specified range, no income adjustment will be made.
The use of multiple year data allows for yearly variations to be averaged out and would therefore add value to transfer pricing analysis, said the Department. “The amended rules would therefore provide clarity in determination of price in transfer pricing cases and reduce disputes. It is a part of the government’s continuing initiative of providing a stable and certain direct tax regime,” the department stated.