Advance Pricing Agreement to cover previous 4 yrs deals, ‘range concept’ introduced to deal with arm’s length price for computing tax liability
New Delhi : Seeking to reduce transfer pricing litigation, Finance Minister Arun Jaitley proposed to introduce a “Roll Back” provision under which Advance Pricing Agreement (APAs) would cover transactions for previous four years.
With regard to arm’s length price for computing tax liability under the transfer pricing rules, he said a new “range concept” would be introduced in line with the international practices.
The issue of transfer pricing – transaction prices between separate entities of large firms – has generated much heat in India involving MNCs operating here such as Vodafone, Shell, WNS and Nokia.
“I propose to strengthen the administrative set up of APA to expedite disposal of applications. Further, I propose to introduce a “Roll Back” provision in the APA scheme so that an APA entered into for future transactions may also be applied to international transactions undertaken in previous four years in specified circumstances,” Jaitley said in Budget 2014-15 speech.
In 2013-14, the tax department had received 232 applications from MNCs, up 60 per cent year-on- year, to obtain advance ruling over pricing arrangement for transactions within group firms and the ensuing tax liability.
With Rs 4 lakh crore locked in litigations, Finance Minister Arun Jaitley also proposed to allow domestic companies to obtain advance ruling with regard to their direct and indirect tax liabilities.
Till now the facility for obtaining Advance Ruling was available to non-residents and public sector undertakings.
Cos must adopt new accounting standards by ‘17
Companies should mandatorily follow the new accounting standards that are converged with international norms from FY’17 while timelines for financial services sector entities would be announced later. “There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS),” Finance Minister Arun Jaitley said.
