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Expectation from Tax Payer And Role of Department in Alternative Dispute Resolution Mechanism
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
INDEX
Background The Expectation Gap Our Expectation An Overview The Audited Accounts The Report in Form 3CEB Documentation Requirements and Expectation Bridging the Expectations Gap Alternate Dispute Resolution Mechanism
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
BACKGROUND
Transfer pricing (TP) is a subject of relatively recent origin, in the Indian tax regime. The TP law is evolving.
contd...
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
BACKGROUND Increasing globalization, dismantling of trade barriers and the free movement of capital are the change inducing factors Though TP is a limited subject in the tax code, its horizons being global, are much bigger. Conventionally, TP largely impacted foreign grown MNCs, but now, more and more home grown MNCs, as well as close knit/family run businesses like diamond and jewellery are in the TP net.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
The recent flurry of ITAT TP judgments, indicates the appellate churning out of the law. Its principles will crystallize on an all India basis, in due course of time. The government is sensitive to the dynamic nature of the subject and is open to changes and amendments. TP compliance costs are comparatively high. The government is also sensitive to the TP compliance cost and the fact that even SMEs would tend to be in the TP net, if the threshold bar is not high enough.
contd
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
The limited availability of information in public domain has been a hindrance in TP audits. The volume of TP audits is increasing each year. The Income Tax Department is constantly reviewing the TP law and practices, training its staff and learning its lessons, both in India and abroad. There is a lingering gap, between the expectations of the ITD and the tax payers compliance. The expectation gap needs to be bridged to the satisfaction of both parties.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
There is a general unwillingness to give even routine data, on grounds of confidentiality and secrecy. At times data of even a wholly owned AE is not furnished, citing lack of control over the AE. Even though information is available, direct methods like CUP are avoided and TNMM is preferred.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
THE EXPECTATION GAP We find that based on experience, the assessees, and their ARs, are willing to accept, amend and adapt. There has been a willingness to accept our findings, on the part of the assessees and to rearrange their international transactions.
contd
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
Assessees have modified their TP practices, on the basis of past TP audits. ARs have been willing to put in the efforts, to match our expectations. ARs have kept pace with changes in the law, which is why I have been invited here
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
suitably explain the TP transactions, with adequate supporting evidence, avoid frivolous litigation and most important. do not arrange your affairs with AEs, such as to deprive India, of its legitimate revenue.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
We thus expect a correct and complete disclosure of information related to the IT of the assesses, with its AEs as prescribed in the said annexure.
contd
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
While the Reports of the accountants in Form 3CEB have been by and large satisfactory, we do notice cases of ::Concealment/incomplete disclosure of information. Non reporting of AEs and transactions with them. Mismatches between Form 3CED and the audited accounts. Misclassification of information. ERRORS AND PARTICULARLY DELIBERATE ONES ERODE THE TRUST BETWEEN US AND THE ASSESSEES.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
Unwillingness to furnish information. Such stark unwillingness on the part of assessees portends an attitude to conceal and could be perhaps due to a lack of any punishing penal provision for such non compliance.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
A fair and proper administration of the tax law is a joint effort between the ITD and the assesses. An open, positive and transparent attitude on the part of the assesses, goes a long way in bridging the expectations gap.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
An alternate dispute resolution mechanism is a prevailing mode in many other countries and as the TP law develops in India, we have also rightfully adopted it.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
file his acceptance of the variations to the AO or file his objections if any, to such variations with i) the DRP and ii) the AO. DRP means a collegium consisting of three CITs constituted by the CBDT for this purpose. The AO shall pass the assessment order, within one month from the end of the month, in which, the acceptance is received or the period of filing of objections expires. The DRP shall, in a case where objection is received, issue such directions as it thinks fit, for the guidance of the AO, to enable him to complete the assessment.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
The section prescribes that the DRP shall examine such records and make such enquiry as it thinks fit, before issuing directions to the AO. The DRP may confirm, reduce or enhance the variations proposed in the draft order. It shall however not set aside any proposed variation or issue any direction for further enquiry and passing of the assessment order. In case of any difference of opinion in the DRP, the point will be decided by the opinion of the majority.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
Every direction of the DRP shall be binding on the AO. No directions shall be issued unless an opportunity of being heard is given to the assessee and to the AO. No direction shall be issued after 9 months from the end of the month in which the draft order was forwarded to the assessee. Upon receipt of the directions, the AO shall complete the assessment in conformity with the directions, without providing any further opportunity to the assessee, within one month from the end of the month in which the direction is received.
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM
TRANSFER PRICING EXPECTATIONS FROM TAX PAYER AND ROLE OF DEPARTMENT IN ALTERNATIVE DISPUTE RESOLUTION MECHANISM