'Essar group entities, Vodafone, several others facing Transfer Pricing case'

 

Essar group entities, Vodafone and Bharti Airtel figure in the list of companies which were found to have undervalued shares and have faced Transfer Pricing (TP) adjustments in 2012-13.

"In FY 2012-13, 27 cases of undervaluation of shares sale by Indian companies to their Associated Enterprises had been detected and were subjected to appropriate transfer pricing adjustments, in accordance with the provisions of Income Tax Act, 1961," Finance Minister P Chidambaram said in a written reply in the Lok Sabha today.

The list includes five Essar group companies, Shell India Markets, HSBC Securities, Standard Chartered Securities, Havells India and Patel Engineering.

Transfer pricing deals with the technique where parent companies sell goods and services to subsidiary entities at an inflated price to deliberately reduce profits and tax liability.

The law requires that goods and services should be sold to subsidiary companies at arm's length price -- the price at which goods are traded between unconnected companies.

Taxing these units has become a complex area for the Revenue Department, with the government often disagreeing on the profits declared by a foreign company for its Indian unit.