Transfer Pricing Rules Not Clear On Cost-Sharing

Although the draft rules on transfer pricing regulations released recently by the Central Board of Direct Taxes (CBDT) are comprehensive, experts are worried that certain provisions in the draft rules, if not clarified further or rectified, could have an adverse impact on MNCs operating in India.

Mukesh H Butani, a partner in Arthur Andersen said that the draft rules concerning cost-sharing agreements were ambiguous in nature and if implemented would increase the international transaction cost between related parties especially for MNCs who had set up their operations in India. He added that increased transaction cost had the potential to wipe out the cost competitive advantage offered by India.

He added,