Secondary Adjustment – Section 92CE of Income Tax Act The Finance Act, 2017 has inserted the provision of “Secondary adjustment” to reflect that the actual allocation of profits between the assessee and its AE are consistence with the transfer price determined as a result of primary adjustment, thereby removing imbalance between cash account and actual … Read more
Transfer Pricing Assessment Procedure in India Appeal Procedure Power of Assessing Officer to determine the Arm’s Length Price Section 92C(3) gives power to AO to determine the arm’s length price in relation to international transaction and specified domestic transaction under the following circumstances : – a. The price charged or paid in an international transaction … Read more
The tax dispute resolution mechanism under transfer pricing in India consists of the following forums : – DRP or Appeal before the Commissioner of Income Tax (Appeals); Income Tax Appellate Tribunal; The High Court / Supreme Court; Safe Harbour Rules; Advance Pricing Agreement; and Mutual Agreement Procedure DISPUTE RESOLUTION PANEL – [SECTION 144C] – FEATURES … Read more
For under reporting of income – Section 270A Section 270A provides for levy of penalty @ 50% of tax payable (including surcharge and education cess), for under-reporting of income. However, additions made in conformity with ALP, determined by TPO would not be considered underreported income if : – Assessee has maintained information and documents, as … Read more
Functional Analysis For Every International Transaction, The company needs to undertake a functional analysis as under Diagram 1.53 For every international transaction, Functional, Asset and Risk (FAR) analysis needs to be undertaken to identify the tested party – For Tested Party concept Refer Page <> . First of all, we need to identify the significant … Read more
Documents and Compliances- Documentation required under the Income Tax Act, 1961 Although safeguards such as transfer pricing provisions have been put into place to regulate international transactions between associated enterprises, it will not prove effective if there is no evidence of its implementation. Thus, Documents and Compliances i.e. Documentation required under the Income Tax Act, … Read more
Arm’s Length Price Transfer Pricing Related parties i.e. associated enterprises, often, due to being related, agree upon a price that may be below the market price i.e. the price charged in a transaction between two unrelated parties. This plays against international standards and places other entities at a disadvantage. Furthermore it hampers proper tax liability … Read more
International Transaction – Section 92B of Income Tax Act Transfer Pricing provisions are applicable to determine the arm’s length price of ‘International transaction’ and ‘Specified domestic transactions” between Associated enterprises. Even though domestic transactions are covered in Transfer Pricing , generally Transfer Pricing provisions are mostly considered in the context of international transaction. Thus, it … Read more
Deemed Associated Enterprises -Section 92A (2) There may be certain cases where enterprises may not fulfil the conditions under Section 92A (1) i.e. it would not fall under the definition of ‘Associated Enterprise’. The definition given is quite broad and isn’t sufficient to cover all possible situations to bring all enterprises operating in a similar … Read more
Associated Enterprises Transfer Pricing- Section 92A (1) Transfer Pricing provisions help in determining the price in a transaction between two or more international Associated Enterprises. The provisions of the Income Tax Act, 1961 define the term “Associated Enterprises” and also provide for situations where certain entities may also be defined as a ‘Deemed Associated Enterprise’. … Read more