This is an attempt to explain the broad concept of and rationale behind Transfer Pricing Regulations. Also gives a high level view of the scheme of Indian Transfer Pricing Regulations as on date. Points out the TP controversies in India. Above all gives a well spirited guidance on dealing with TP in India.
Transfer Pricing
Objectives of Transfer Pricing
Methods of Transfer Pricing
Cost Based Transfer Pricing
Market Based Transfer Pricing
Negotiated Transfer Pricing
Advantages and Disadvantages
This ppt describe the Definition of TP with introduction to Transfer pricing and Objectives with types of TP addressed.
Subscribe to Vision Academy YouTube Channel
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Unit II Tax Planning and Company PromotionDayanand Huded
The chapter comprises of Meaning of Tax Planning, Tax Avoidance, Tax Evasion and Tax Management; Features and Scope for Tax Planning; Business Location and Tax Planning; Nature of Business and Tax Planning: FTZ, Units in SEZ, 100% EOU and Infrastructure Development.
Tax planning is a focal part of financial planning. It ensures savings on taxes while simultaneously conforming to the legal obligations and requirements of the Income Tax Act, 1961. The primary concept of tax planning is to save money and mitigate one's tax burden.
Tax Planning is the arrangement of financial activities in such a way that maximum tax benefits are enjoyed by making use of all beneficial provisions in the tax laws. It entitles the assessee to avail certain exemptions, deductions, rebates and reliefs, so as to minimise its tax liability.
(i) Reduction of tax liability: One of the supreme objectives of tax planning is the reduction of the tax liability of the payer and the resultant saving of the earnings for a better enjoyment of the fruits of hard labour.
(ii) Minimization of litigation and the tax payer may be saved from the hardships and inconveniences caused by unnecessary litigations.
(iii) Productive investment: Tax planning is a measure of awareness of the taxpayer to the intricacies of the taxation laws and it is the economic consciousness of the income earner to find out the ways and means of productive investment of the earnings which would go a long way to minimize its tax burden.
(iv) Healthy growth of economy: The saving of earnings is the only basement upon which the economic structure of human life is founded.
(v) Economic stability: Productive investment increase contours of the national economy embracing in itself the economic prosperity of not only the tax payers but also of those who earn the income not chargeable to tax. The planning thus creates economic stability of the nation and its people by even distribution of economic resources.
(i) Residential status and citizenship of the assessee: We know that a non-resident in India is not liable to pay income-tax on incomes which accrue or arise and are also received outside India, whereas a resident in India is liable to pay income-tax on such incomes.
(ii) Heads of income/assets to be included in computing net wealth: Before the Tax-planner goes in for his task; he has to have a full picture of the sources of Income of the tax payer and the members of his family
To understand the meaning, need,objective and issues of secondary adjustment and to know the intent of government to introduce secondary adjustment in transfer pricing. Method of secondary adjustment adopted by India. To analyse Union Budget 2019 amendments regarding secondary adjustment. Finally, to know the method of secondary adjustment adopted in other countries.
Tax Planning Concept and tax planning with specific managerial decisionsSundar B N
In this ppt most of the tax planning concepts are covered. Tax planning, Tax evasion, tax avoidance, tax planning with inter corporate dividend and Bonus share. Tax Planning with specific managerial decisions are covered.
Subscribe to Vision Academy for Video assistance
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Transfer Pricing
Objectives of Transfer Pricing
Methods of Transfer Pricing
Cost Based Transfer Pricing
Market Based Transfer Pricing
Negotiated Transfer Pricing
Advantages and Disadvantages
This ppt describe the Definition of TP with introduction to Transfer pricing and Objectives with types of TP addressed.
Subscribe to Vision Academy YouTube Channel
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Unit II Tax Planning and Company PromotionDayanand Huded
The chapter comprises of Meaning of Tax Planning, Tax Avoidance, Tax Evasion and Tax Management; Features and Scope for Tax Planning; Business Location and Tax Planning; Nature of Business and Tax Planning: FTZ, Units in SEZ, 100% EOU and Infrastructure Development.
Tax planning is a focal part of financial planning. It ensures savings on taxes while simultaneously conforming to the legal obligations and requirements of the Income Tax Act, 1961. The primary concept of tax planning is to save money and mitigate one's tax burden.
Tax Planning is the arrangement of financial activities in such a way that maximum tax benefits are enjoyed by making use of all beneficial provisions in the tax laws. It entitles the assessee to avail certain exemptions, deductions, rebates and reliefs, so as to minimise its tax liability.
(i) Reduction of tax liability: One of the supreme objectives of tax planning is the reduction of the tax liability of the payer and the resultant saving of the earnings for a better enjoyment of the fruits of hard labour.
(ii) Minimization of litigation and the tax payer may be saved from the hardships and inconveniences caused by unnecessary litigations.
(iii) Productive investment: Tax planning is a measure of awareness of the taxpayer to the intricacies of the taxation laws and it is the economic consciousness of the income earner to find out the ways and means of productive investment of the earnings which would go a long way to minimize its tax burden.
(iv) Healthy growth of economy: The saving of earnings is the only basement upon which the economic structure of human life is founded.
(v) Economic stability: Productive investment increase contours of the national economy embracing in itself the economic prosperity of not only the tax payers but also of those who earn the income not chargeable to tax. The planning thus creates economic stability of the nation and its people by even distribution of economic resources.
(i) Residential status and citizenship of the assessee: We know that a non-resident in India is not liable to pay income-tax on incomes which accrue or arise and are also received outside India, whereas a resident in India is liable to pay income-tax on such incomes.
(ii) Heads of income/assets to be included in computing net wealth: Before the Tax-planner goes in for his task; he has to have a full picture of the sources of Income of the tax payer and the members of his family
To understand the meaning, need,objective and issues of secondary adjustment and to know the intent of government to introduce secondary adjustment in transfer pricing. Method of secondary adjustment adopted by India. To analyse Union Budget 2019 amendments regarding secondary adjustment. Finally, to know the method of secondary adjustment adopted in other countries.
Tax Planning Concept and tax planning with specific managerial decisionsSundar B N
In this ppt most of the tax planning concepts are covered. Tax planning, Tax evasion, tax avoidance, tax planning with inter corporate dividend and Bonus share. Tax Planning with specific managerial decisions are covered.
Subscribe to Vision Academy for Video assistance
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Tax haven is creating a lot of scope for money laundering and tax evasion. Money Laundering is treated as a crime whereas tax evasion is not treated as crime and there is no strict legal action. Tax haven affects in lower tax collection by countries. The money which should be spent on people is enjoyed by certain group of people.
Currency derivatives is a kind of new class of assets available for investment. Please go through this PPT which will give you some idea about currency & Currency derivatives.
Tax Havens , Major Tax Havens around the world.JASEEM LAL
What is a Tax Haven
OECD Criteria for a Tax Haven
Characteristics of a Tax Haven
Uses of a Tax Haven
Legal entities in a Tax Haven
Major Tax Havens around the world
Types of Tax Havens
Examples: Types of Tax Havens
# Cayman Islands
Effects of Tax Havens
Four Reasons Of Tax Havens Are Good
The response of Governments
OECD objectives
Is there a future for Tax Havens
Indian Domestic Transfer Pricing Provisions - an Overview by Ameya KunteAmeya Kunte
This presentation was during Transfer pricing workshop arranged by Chamber of Tax Consultants on March 23rd, Saturday. The presentation cover the overview of Domestic Transfer pricing provisions introduced by Finance Act 2012, history of introduction (including Supreme Court ruling in Glaxo) and some issues.
Overview of Transfer Pricing in India - EY IndiaSadanandGahivare
Read about transfer pricing in India & its applicability which can help you build and implement the structure that makes sense for your business & to manage the cost of trade.
To understand various issues and concerns faced by the entrepreneurs/top management on the key aspects of Related party transactions and to support them in implementing better governance in organizations.
Transfer pricing refers to the pricing of transactions between associated enterprises. It is a regular part of the operations of a multinational company but needs careful attention due to varying tax laws across countries.
Transfer Pricing Forum: Transfer Pricing for the International Practitioner, ...Matheson Law Firm
Joe Duffy, Partner in the Tax Group, and Kathryn Stapleton, Solicitor in the Tax Department, co-wrote the Ireland section for Transfer Pricing Forum: Transfer Pricing for the International Practitioner, September 2016.
Notes on International transfer pricing in indiaPrasad Bhalerao
This document contains notes on the regulations around international transfer pricing in India. Document elaborates -
> Meaning of International Transaction
> Meaning of Associated Enterprises
> Meaning of Arm's Length Pricing
> Methods of Arm's Length Pricing
> TP Certification and Documentation and
> Penalties
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
2. Transfer Pricing – Meaning & Concept
2
The Price at which two related parties transact business
between themselves.
When two related parties decide between themselves the
transaction price, there is a scope for such parties affecting
the price which will be different from the price if transacted
between the unrelated parties. This is mis-pricing.
3. Impact of not regulating
3
Example:
A is US based parent company having B as Indian WOS. B
selling services to A at a price of Rs.100 Cr. and incurs
Rs.90 Cr. as expenses making Rs.10 Cr. PBT. Given
corporate tax of 30%, PAT is Rs.7 Cr. Assuming 100%
distribution as dividend, DDT @ 15% will be Rs.1.05 Cr.
and net Rs.5.95 Cr. Will be repatriated.
Suppose, If the price between the unrelated parties would
have been Rs.120 Cr., the difference will be as follows-
4. Impact of Mis-Pricing
4
Situation 1
Situation 2
Difference
Sales
100
120
20
Less: Expenses
90
90
-
PBT
10
30
20
Less: Corporate
Tax
3
9
6
PAT
7
21
1
DDT
1.05
3.15
2.10
Net Repatriation
5.95
17.85
14.90
Tax Avoidance
Flight of Capital
5. How is this regulated?
-Transfer pricing adjustment
5
Situation 1
Situation 3
(After Transfer
Pricing
adjustments)
Difference
Sales
100
100
-
Less: Expenses
90
90
-
PBT
10
10
-
Less: Corporate
Tax
3
9
6
PAT
7
1
-6
DDT
1.05
0.15
-0.90
Net Repatriation
5.95
0.85
-5.10
6. Areas not addressed?
6
Situation 2
Situation 3
(After Transfer
Pricing
adjustments)
Difference
Sales
120
100
-20
Less: Expenses
90
90
-
PBT
30
10
-20
Less: Corporate
Tax
9
9
0
PAT
21
1
-20
DDT
3.15
0.15
-3
Net Repatriation
17.85
0.85
-17
Secondary Adjustments; Consequent Flight back of Capital
7. Indian TP Regulations
7
International Transactions
Introduced by Finance Act 2001 w. e. f.
01.04.2002. AY 2002-03.
Specified Domestic Transactions
Introduced by Finance Act 2012 w. e. f.
01.04.2013. AY 2013-14.
8. TP- International Transactions
Scheme of Regulations
8
Income from International Transactions to be computed having regard to
Arm’s Length Price.
Cost sharing arrangements also covered.
Not applicable if, reduces tax liability or increases loss.
International transaction defined. Deemed international transactions.
Associated Enterprise (related parties) defined.
ALP defined. Methods prescribed for computation. Most appropriate
method to be used. Guidance provided.
Documentation requirements prescribed.
Filing requirements prescribed.
AO / TPO can re-determine ALP and make adjustments in income.
Option to go to DRP.
Normal appeal route available.
Safe Harbour Rules prescribed.
Advance Pricing Agreement.
9. TP- Specified Domestic Transactions
Origin, Rationale & Scheme of Regulations
9
Observations of Supreme Court in CIT vs. Glaxo SmithKline Asia (P)
Ltd.
Tax arbitrage from loss making concern.
Tax arbitrage from exempted on low tax unit.
Complications where fair market value to be assigned under sec
40A(2).
Documentation requirement.
Applicable to “Specified Domestic Transactions” as defined.
Allowance for expenditure, interest, cost allocation or income in
relation to SDT to be computed on ALP.
Determination of ALP, documentation requirements and filing
obligations similar to those for international transactions.
Safe Harbour and APA not applicable.
10. Practice of Transfer Pricing
10
Check for international transaction - if any transaction with associated
enterprise.
Check for specified domestic transactions, If value is more than Rs. 5 Crore
If Yes, maintain the documentation on contemporaneous basis.
Determine ALP towards the end of financial year and if possible adjust
pricing by true-up or true-down.
While filing the tax return conduct testing by the prescribed methods to
check if within ALP range. If not, volunteer addition to that extent.
Get 3CEB report from a CA and file the same online by the due date (30th
Nov).
When required by AO or TPO, submit the documents maintained and supply
the information called for in support of ALP.
If AO or TPO reject assessee’s ALP and re-determine ALP, insist on show
cause notice before the order.
11. Practice of Transfer Pricing (contd.)
11
Carefully examine the show cause notice and the points raised in the
notice.
Make a thorough research on the comparables used by the AO/TPO
and also on the comparables rejected by the AO/TPO to objectively
evaluate the comparability in light of the guidance given under the
regulations.
Refer to the documentation maintained, relevant provisions of
regulations , guidance available in OECD TPG, decisions of the ITAT,
HC and SC on the relevant issues to respond to the notice.
If adverse order, evaluate option to go for appeal before the CIT(A)
and in case of international transactions to go before the DRP.
See, if in case of international transactions, going forward safe
harbour or APA can be considered.
12. International Transaction - Meaning
12
Transaction between two or more AEs where at least one is a nonresident.
Purchase, sale or lease of tangible or intangible property
Provision of services
Lending or borrowing money
Any other transaction having a bearing on the profits, income, losses or
assets.
Includes mutual cost contribution or cost sharing or cost allocation or
cost apportionment agreements or arrangements.
Deemed International transaction. Prior agreement or terms
determined in substance with AE.
Explanation inserted by Finance Act 2012. Capital financing, provision
of services, business restructuring, intangible property clarified.
13. Associated Enterprise - Meaning
13
Participation in management, control or capital, directly or
indirectly.
Commonality of management, control or capital, directly or
indirectly.
13 situations spelt encompassingCapital or voting power – 26% or more.
Lending in more than 51% of assets value.
Guaranteeing 10% or more of borrowings.
Control on appointment of majority of Directors or ED or governing board
members.
Exclusive control over critical business inputs - intangibles.
90% or more raw material and consumables supply and price controlled.
Common individual /HUF/member, with or without relatives, controls.
10% or more interest in firm, AOP or BOI.
Any relationship of mutual interest, as may be prescribed.
14. Specified Domestic Transactions - Meaning
14
Any of the following, not being an international transaction1.
Expenditure where payment to 40A(2)(b) persons; or
2.
80A transaction; or
3.
80-IA (8) transfer of goods or services; or
4.
80-IA (10) business transactions; or
5.
10AA or any other where 80-IA(8) or 80-IA(10) applicable; or
6.
any other transaction as may be prescribed, and
Where the aggregate value of transactions more than Rs 5 crore.
Note: A. For computing Rs 5 crorea) International transactions value to be excluded.
b) Transactions between 2 units of the same company to be covered when
undertaken with a tax holiday unit.
c)
Inter-company transactions to be covered when undertaken with a
company having a tax holiday unit.
B. If transaction value less than Rs 5 crore, existing tax laws and FMV to
apply.
15. Related parties u/s 40A(2) – Important point
15
SDT would cover shareholding of 20% or more.
International transaction requires shareholding of 26% or more.
Where in case of cross border transactions, shareholding is less
than 26%, it is not covered under International Transactions but
if still it is 20% or more, it will be covered under SDT.
16. Documentation
16
S.
no.
Nature of
document
Contents
1
Assessee Level
-ownership structure or other interest held in
2
Group Level
- Profile of Group with name, address, status, residence of
entities with whom transacted.
3
Business and
industry
- Description of assessee’s and AE’s business and of
assessee’s industry.
4
Transaction Level
-
5
FAR analysis
-of both, assessee and the AE.
6
Economic and
market analysis
Budgets, forecasts or other financial estimates for the
business as a whole and for the divisions or product,
having bearing on the transaction.
7
Record of
Comparables
considered
Record, including nature, terms and conditions, of internal
and external comparables taken into account
Nature, value and terms of transaction, property
transferred or services rendered.
17. Documentation (contd.)
17
S.
no.
Nature of
document
Contents
8
Record of
comparables’
Analysis
Analysis performed to evaluate comparability of
uncontrolled transactions with the tested transaction.
9
Methods and MAM
Methods considered, selected with reasons and also how
applied.
10
Workings of ALP
determination
Details of the comparable data and financial info used in
applying the MAM, adjustments, if any made.
11
Assumptions,
policies and price
negotiations
Which have critically affected the determination of ALP.
12
TP Adjustment
Details of TP adjustment, if any made to align with ALP
determined. Also, the consequent adjustment to the total
income for tax purposes.
13
Any other
Relevant data, information or document of assessee or of
AE relevant for determination of ALP.
18. Methods of ALP computation
18
Method
What is compared?
Appropriateness
1
Comparable
Uncontrolled Price
Method (CUP)
Price of the transaction
Where there is a very close similarity in
product/service and either internal or external
comparable price is available.
2
Resale Price
Method (RPM)
Gross Profit Margin
Where purchases from a related party and sales to an
unrelated party with little value addition.
3
Cost Plus Method
(CPM)
Gross Profit Margin on
direct cost or indirect cost
Where purchase or sale is of semi finished
goods/services
4
Profit Split Method
Relative contribution by
each entity, to total value
addition
Where use of unique intangibles is involved or where
there are multiple inter-related transactions and
cannot be evaluated separately.
5
Transactional Net
Margin Method
(TNMM)
Net Profit Margin with
reference to cost incurred,
sales affected or assets
employed
Residual method.
Where reliable comparable data and broad
functional comparable available
6
Other Method
Price charged
Where none of the above is suitable and info is
available by way of valuation reports, quotes, etc. to
establish price charged or that would be charged.
19. Most Appropriate Method – Factors to consider
19
-best suited to the facts and circumstances of each particular international transaction, and
- provides the most reliable measure of ALP in relation to the international transaction
S.
no.
Factors
1
Nature and class of the international transaction
2
Class of AEs, taking into account their FAR
3
Availability, coverage and reliability of data necessary for application of the
method.
4
The degree of comparability between – international transaction and
uncontrolled transaction; enterprises entering into such transactions.
5
The extent to which reliable and accurate adjustments can be made, if any
between- international transaction and comparable uncontrolled transaction;
enterprises entering into such transactions.
6
Nature, extent and reliability of assumptions required to be made in application
of a method.
20. Comparability factors
20
S. no.
Factors
1
Specific characteristics of the property transferred or services provided in either
transaction
2
FAR of the respective parties to the transactions
3
Contractual terms of the transactions which lay down explicitly or implicitly how the
responsibilities, risks and benefits are to be divided between the respective parties to the
transactions
4
Conditions prevailing in the market in which respective parties operate, including –
• the geographical location and size of the markets,
• the laws and Government orders in force,
• costs of labour and capital in the markets,
• overall economic development and level of competition and
• whether the markets are wholesale or retail.
Comparable If none of the differences likely to materially affect; reasonable accurate adjustments can be made to
eliminate the effect of such differences.
Current year data to be used.
Previous 2 years’ data can also be used if reveals the facts having bearing on the determination of TP.
22. Rejection by TPO/AO – 92C(3)
22
• During the course of assessment proceedings,
• On the basis of material or information or
document in possession,
• AO (or TPO) is of the opinion that -
1
The price charged or paid has not been determined in accordance
with 92C(1) and 92C(2); or
2
Any information and document have not been kept and maintained
as per 92D and 10D; or
3
The information and data used in computation of ALP is not reliable
or correct; or
4
The assessee has failed to furnish, within the specified time, any
information or document which was required by 92D(3) notice.
23. Penalties
23
Default
Penalty
Documentation not maintained
2% of value of transaction (s).
Required documents not furnished
2% of value of transaction (s).
Transaction(s) not reported in
92E/3CED Report
2% of value of transaction (s).
Incorrect documents maintained or
furnished
2% of value of transaction (s).
24. SDT- Certain cases
24
S.
no.
Transaction
Guidance
1
Remuneration to director or
key management personnel
-Look into job profile, experience and knowledge
and compare with remuneration paid to key
management personnel of comparable
companies.
- TNMM as a last resort.
2
Rent payment
-
-
Look into the size, area, location, quality of
construction, lease term and other relevant
factors and check if CUP can be used.
Independent Chartered Engineer’s certificate,
as “other method”.
3
Interest on loan, guarantee fee
- Compare with Indian bank’s rates.
4
Purchases
- CUP, RPM or TNMM
5
Royalty, FTS, Commission or
Brokerage
- CUP or TNMM
25. Uniqueness of Indian TP Regulations
25
s. no.
Unique nature
1
Arithmetic Mean
2
Single year data
3
Contemporaneous data can be refreshed during TP audit
4
TP Report (92E)
26. TP Controversies
26
1 Single year data
8
Intangibles/Advertising and
Marketing Promotion
expenses- Bright line test
15
Under valuation of
shares allotted
2 Tested Party
9
Capacity utilization adjustment
16
Loan/interest
3 Burden of proof
10
Location savings
17
Use of customs data
4 Turnover filter, Employee
cost filter, Related Party
filter
11
Entity level vs. transaction level
18
Applicability to exempt /
non-taxable income
5 Internal vs External
comparables
12
PLI selection, computation and
adjustments
19
5% tolerance limit
6 Secret Comparables
13
Selection of MAM
20
Risk adjustment
7 Management charges
14
Guarantee fee
21
Working capital
adjustment
27. Defense Strategy
27
Analysis and Benchmarking prior to transaction
Inter entity contract
Contemporaneous documentation and review on regular basis.
True-up/True-down with year end testing
Testing again while filing tax return and volunteering adjustment, if
any.
Take TP audit with all seriousness and put best foot forward at that
level itself.
Evaluate Safe Harbour option, if applicable
Evaluate APA option.
28. Safe Harbour
28
Circumstances where tax authorities shall accept the TP declared by
the assessee. Safe Harbour is an exception to ALP rule.
Eligible International Transaction and Eligible assessee defined.
Safe Harbor operating margins range – IT/ITES: 20% to 25% ; Intra
group loans: SBI rate+1.5% to 3%; Corporate guarantee fee: 1.75%;
contract R&D software 30% and pharma 29%; manufacture and
export of core auto 12%, and non-core auto 8.5%.
Operating profit margin, operating expenses, operating revenue
defined.
Insignificant risk – factors to consider
29. Safe Harbor (contd.)
29
Applicable for AY 13-14 and 4 AY thereafter. Can exit and re-enter.
No comparability adjustments
3CEB and documentation continue to be maintained.
Procedure-File tax return by due date offering safe harbour rates.
-File Form 3CEFA by due date
- wait for 60 days, if no reply treat accepted. If get a notice or
rejection, attend.
- Can go to Commissioner who to dispose of in 60 days.