Despite promising a slew of measures to tackle cross-border tax troubles in the Union Budget 2009-10, Central Board of Direct Taxes (CBDT) is yet to take any action on two key proposals of setting up dispute resolution panels across the country and formulating safe harbour rules to tackle transfer pricing.
In fact, the introduction of alternate dispute resolution panel to address transfer pricing disputes has overshot its roll out date by over a month. The Union Budget 2009-10 had announced alternate dispute resolution panel to deal with disputes pertaining to transfer pricing and taxation of foreign companies, which were to be operational from October 1, 2009.
The CBDT had later deferred the deadline to October 30. However, it has postponed it again. ?We are working on the new guidelines. They should be notified this month,? a CBDT official said.
The dispute resolution panels (DRP) would cut down lengthy litigation on transfer pricing and help resolve cases soon. These would handle all transfer pricing-related adjustments and adjustments for foreign branch offices.
Instead of appealing against the order of the assessing officers in tribunals and courts, taxpayers would be expected to go to dispute resolution panels. These can pass draft orders providing relief on the tax liability calculated and raised by an assessment officer within 30 days of the appeal and a final order within nine months. The panels can, however, not waive any penalty amount.
The panels are likely to be set in five cities, including Mumbai, Delhi, Kolkata, Chennai and Bangalore. Each panel will have three members of the rank of income tax commissioners.
Also, the Budget had also announced safe harbour rules, expected to be notified by October. The rules aimed at cutting down transfer pricing litigation would list out situations where the income tax authorities shall accept the transfer price declared by the assessee.
?There should be no adverse impact of the delay except when the guidelines are announced, the 30-day time period for taxpayers to file appeals and the nine months deadline by which the DRP has to give its final order will also get pushed back,? said Mukesh Butani, partner BMR advisors said.