Eyeing consistency, CBDT streamlines transfer pricing norms

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New Delhi | Published: October 18, 2015 12:48:22 PM

Looking to streamline the taxation procedure, CBDT has issued detailed guidelines on transfer pricing cases that are expected to bring about uniformity in determining arm's length price in similar instances.

income taxThe CBDT instruction further said the TP cases should be selected for scrutiny on the basis of risk parameters and not the transaction amount, as was the earlier practice.

Looking to streamline the taxation procedure, CBDT has issued detailed guidelines on transfer pricing cases that are expected to bring about uniformity in determining arm’s length price in similar instances.

As per the regulations, each Transfer Pricing Officer (TPO) will be assigned a given number of important and complex cases not exceeding 50.

The Assessing Officer will be required to record in writing that the TP case falls in his jurisdiction and also the income involved in international transactions before proceeding with the case and referring it to TPO for further action.

The new set of guidelines issued by the Central Board of Direct Taxes (CBDT) will replace the instructions, the board said.

Transfer pricing refers to the practice of computing arm’s length price for transactions between group companies in different countries for determining profit and levying of taxes.

CBDT has also asked the officers dealing with such cases to maintain data in a prescribed format “for future action and also to bring about uniformity in determination of the arm’s length prices in identical or substantially identical cases”.

It also said a similar guidance note will be issued to deal with transfer pricing cases pertaining to domestic transaction within the group.

The CBDT instruction further said the TP cases should be selected for scrutiny on the basis of risk parameters and not the transaction amount, as was the earlier practice.

“Since the case will be selected for a scrutiny before making a reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during the pendency of assessment proceedings, but must wait for the report/order of the TPO on the value of international transactions before making final assessments,” it clarified.

The order of the TPO should contain details of the data used, reasons for arriving at a certain price and the applicability of the methods for computing arm’s length price, it added.

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