New mechanism for transfer price disputes
The government on Monday proposed to usher in an easier dispute settlement mechanism within the Income Tax department for resolution of transfer pricing issues.india Updated: Jul 07, 2009 00:45 IST
The government on Monday proposed to usher in an easier dispute settlement mechanism within the Income Tax department for resolution of transfer pricing issues.
Transfer pricing refers to the pricing of contributions transferred within an organisation. This would include goods from the production division that may be sold to the marketing division, or goods from a parent company that may be sold to a foreign subsidiary.
As the prices are set within an organisation, the typical market mechanisms that establish prices for such transactions may not apply.
Foreign companies in India, particularly IT companies, have been demanding simpler transfer pricing rules and dispute settlement mechanism.
“I propose to create an alternative dispute resolution mechanism within the Income Tax Department for the resolution of transfer pricing disputes. To reduce the impact of judgemental errors in determining transfer price in international transactions, it is proposed to empower the Central Board of Direct Taxes to formulate ‘safe harbour’ rules,” said Finance Minister Pranab Mukherjee on Monday.
The information technology industry welcomed the move.