Foreign direct
investment (FDI), foreign exchange management and transfer
pricing laws in India are in limelight these days. For instance,
transfer
pricing order has been issued against Vodafone India. Similarly,
Nokia
has been accused of violating income tax and transfer pricing laws of
India. Shell
India also received a transfer pricing order from Indian tax
authorities.
Further, Income Tax Act, 1961 of India also
incorporates provisions pertaining to avoidance
of income-tax by transactions resulting in transfer of income to non
residents and avoidance
of tax by certain transactions in securities. Despite all
these provisions, the transfer pricing regulatory framework of India
needs further clarification form Indian government.
The finance ministry is now in the process of
devising clear guidelines for contentious transfer pricing cases,
especially for handling the grey areas. We at Perry4Law
and Perry4Law’s
Techno Legal Base (PTLB) believe that this clarification
of the transfer pricing laws and regulations of India would be
beneficial for both foreign companies and FDI entities and Indian
government.
We also welcome the move of Indian government and
Central Board of Direct Taxes (CBDT) for analysing the modalities for
handling transfer pricing cases in India. An I-T department’s
committee has been assigned with the task of drafting rules for
foreign tax credit and it is also looking at transfer pricing issues.
The committee will work out the modalities for handling such cases
and submit its report to the finance ministry.
