Transfer Pricing News in India

​CBDT issues detailed guidance on Mutual Agreement Procedure (MAP)

The Central Board of Direct taxes (‘CBDT’) vide its Notification No. F.No. 500/09/2016-APA-I dated 7 August 2020, has issued a detailed guidance for the benefit of the taxpayers, tax practitioners, tax authorities, competent authority (‘CA’) of India and treaty partner, for implementing the mutual agreement procedure (‘MAP’).

In essence, a MAP is an alternate tax dispute resolution mechanism available to the taxpayers under the Double Tax Avoidance Agreement (‘DTAAs’) for resolving disputes giving rise to double taxation or taxation not in accordance with DTAAs, including transfer pricing disputes.

Almost all DTAAs entered into by India have the MAP Article, and it provides for an additional dispute resolution mechanism offered to taxpayers, in addition to those already available under the Indian tax laws.

This MAP guidance is divided in following four sections:

• Introduction and basic information;
• Access to and denial of access to the MAP;
• Technical issues; and
• Implementation of MAP outcomes.

Further, this guidance follows the introduction of Rule 44G of the Income Tax Rules, 1962 (‘the Rules’),  as notified  on 6 May 2020, which provided for the process to be followed by the Indian CA and by the filed authorities to implement the outcome of the MAP.

 
Accordingly, this guidance provides a much needed clarity to all the stakeholders, for the approach to be followed, and towards an effective implementation of MAP.

Revision in format of form 3CEB, as prescribed for reporting of international and specified domestic transactions

The CBDT vide its Notification No. 82/2020/F. No. 370142/30/2020-TPL dated 1 October 2020, has

revised the format of Form 3CEB prescribed under Rule 10E of the Rules. This particular Form is furnished as an Accountant’s Report under section 92E of Income tax Act, 1961 (‘the Act’), by persons who have entered into an international transaction and/or a specified domestic transactions (‘SDTs’).

This particular revision in the old format of Form 3CEB is primarily made to give effect to the amendments carried out in the provision specified for the meaning of SDTs under section 92BA of the Act.

These respective amendments involved deletion of transactions  contained in section 40A(2)(b) within the meaning of SDTs, and insertion of sub-clause (va) in section 92BA, to cover transactions entered between the persons referred to in sub-section (6) of section 115BAB (‘which provides for lower tax rate for new manufacturing companies’) within the ambit of SDTs.

It is worthwhile to note that disclosure pertaining to reporting of International transactions in old format vis-à-vis new format of Form 3CEB remains unchanged.