Revised circulars: A change in FinMin stance

The revised circulars issued by the government, last week, on the determination of transfer pricing (TP) for development centres (DCs) are truly an unprecedented and welcome initiative. They reflect the willingness of the finance minister, and the Central Board of Direct Taxes, led by the new Chair, Sudha Sharma, to remain flexible to the emerging needs and practical realities of the new business models. They could also mark a turning point in the attitude of tax authorities from adversarial to conciliatory.The move of the finance ministry would address a fundamental problem faced by the tax administration. India is riddled with a large volume of international tax disputes, with most of them relating to transfer pricing. The financial year just gone by recorded TP adjustments of more than Rs 70,000 crore, an increase of 57 per cent over the previous year! Despite the assurances made by the finance minister publicly that the disputes will be minimised, the income tax department has continued to raise demands and make aggressive assessments.

Source : Business Standard