Transfer Pricing Rules to incorporate range concept
Transfer Pricing Rules to
incorporate range concept and use of multi-year data notified to reduce
litigation on transfer pricing issues
The Income-tax Act provides
for determination of income having regard to Arm’s Length Price (ALP) in case
of international transactions and specified domestic transactions. The
provisions of the Income-tax Act were amended through the Finance (No.2) Act,
2014 to facilitate alignment of Indian transfer regime with international best
practices.The manner of computation of ALP is laid down under the Income-tax
Rules.
The Government has notified the amended Rules for determining ALP vide S.O. No. 2860 (E) dated 19/10/2015. The amended regime will be applicable for computation of ALP of international transactions and specified domestic transactions undertaken on or after 1/04/2014.
The amended rules allow for introduction of a “range concept” for determination of ALP and “use of multiple year data” for undertaking comparability analysis in transfer pricing cases. The use of range concept, being a statistical tool, enhances the reliability of analysis undertaken for computation of ALP. The range concept will be applicable in certain cases for determining the price and will begin with the 35th percentile and end with the 65th percentile of the comparable prices. Transaction price shown by the taxpayers falling within the range will be accepted and no adjustment will be made.The use of multiple year data allows for yearly variations to be averaged out and would therefore add value to transfer pricing analysis.
The amended rules would therefore provide clarity in determination of price in transfer pricing cases and reduce disputes on transfer pricing issues. It is a part of the Government’s continuing initiative of providing a stable and certain direct tax regime.
The Notification is available on the website of the Department incometaxindia.gov.in.
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Clarification regarding
exemption to parts and Components of Wind Operated Electricity Generators
(WOEG)
References were
received from trade regarding availability of exemption from Central Excise
duty to the parts and components of Wind Operated Electricity Generators (WOEG)
(popularly called wind turbines), under Notification No. 12/2012-Central
Excise, dated 17.03.2012. To reduce litigation and to improve ease of doing
business in the important sector of non-conventional energy, Central Board of
Excise and Customs(CBEC), Department of Revenue, Ministry of Finance has issued
circular No. 1008/15/2015, dated 20.10.2015 to clarify that parts such as
tower, nacelle, rotor, blades, wind turbine controller etc. of WOEG are
eligible for exemption from Central Excise duty. The circular is available on
the official website www.cbec.gov.in
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