India resolves over 100 transfer pricing disputes with US

India has resolved over 100 past transfer-pricing disputes with the US, the central government said on Thursday.

In a statement here, the Central Board of Direct Taxes (CBDT) said: "More than 100 cases have already been resolved and some more are expected to be resolved before the end of this fiscal."

Simply put, transfer price is the rate at which goods and services are transferred by a subsidiary to its parent or between two companies within the same group or other related entities.

For tax purposes, transfer price assumes greater importance as it can be used as a mechanism to lower profit of a company in a country where the tax rates are high and increase the profits of an entity located in another country where the tax rates are low or nil.

According to CBDT, the resolved transfer-pricing disputes were in the information technology (IT) software development services and IT-enabled services (ITES) sectors.

According to the CBDT, the signing of Framework Agreement with the revenue authorities of the USA in January 2015 is one of the steps to boost investment sentiments among multi-national companies (MNC).

Prior to resolution of disputes under the Framework Agreement the US bilateral advance pricing agreements (APA) programme was closed to India, the CBDT said.

The success of the Framework Agreement in short period of one year has led to the US Revenue Authorities opening up their bilateral APA programme to India, the statement said.

According to the CBDT, the US is expected to begin accepting bilateral APA applications shortly.

The mutual agreement procedure (MAP) programmes with other countries like Japan and Britain are also progressing well with regular meetings and resolution of past disputes.

The CBDT is confident that a combination of a robust APA programme and a streamlined MAP programme would be helpful in creating an environment of tax certainty and encourage MNCs to do business in India.