Directors’ remuneration – Domestic Transfer Pricing

    This is a SDT which is required to be benchmarked as per arm’s length standard. It is a challenge to benchmark each director’s remuneration. There may be a very highly qualified director who may be paid a very handsome remuneration. Whereas another director with ordinary qualification might have been paid in the normal way. How do we benchmark each one’s salary? Whether Schedule XIII of Companies Act, 1956 which deals with restrictions on managerial remuneration should be relied upon as an arm’s length standard? Alternatively director’s remuneration may be benchmarked by adopting Transaction Net Margin Method (TNMM) at the entity level of the tax payer. As of now no clear guidance is available from CBDT in this regard and we expect the same for a litigation free implementation of these provisions in the context of director’s remuneration.