MNC can now appeal with CIT (A) too in respect of transfer pricing related disputes

This is good news for Multi-national companies (MNCs) operating in India. Over 1,600 such companies, who were asked to pay additional corporate taxes on account of their overseas transactions, now, have the option to appeal before the conventional forum of Commissioner (Appeal) as well as Dispute Resolution Panel (DRP) for redressal of their grievances. An appeal before the commissioner (Appeal) may take a year or two for a decision.

However, DRP, a panel comprising three senior officers of the income-tax (I-T) department, is expected to give out an order within nine months.

Unlike in the past, when the order of the transfer pricing officer (TPO) was the final decision, the tax payer can now choose to appeal against TPO’s order before the DRP, whose order will be final and binding on the tax payer as well as the department.

A January 20 order by the Central Board of Direct Taxes (CBDT), the highest administrative body for direct tax matters, has clarified that the taxpayer is free to opt for the conventional appellate forum of Commissioner (Appeal), if he chooses to do so. The CBDT issued the clarification for removing the ambiguity on the issue as many corporates were under the impression that it was compulsory for them to refer the draft TP order to DRP.

The provision for DRP was inserted in the Transfer Pricing Rules in the last budget. The intention behind setting up of such a panel is to help build up the image of India as an investor-friendly country, by facilitating faster resolution to tax disputes, involving overseas entities.

The transfer-pricing regime of India, which deals with the assessment of cross-border taxation, involving Indian companies, has assessed over 1,600 companies and levied an additional demand of over Rs 10,000 crore. Over 800 companies have been asked to pay up additional taxes. All these 800 companies are free to move the DRP which is expected to give an order faster than the commissioner (Appeal). However, they can now opt for DRP or Commissioner (Appeal), depending upon the choice they make.

Related posts:

1. Commissioners associated with transfer pricing orders will not be part of the alternate dispute resolution panel
2. ITAT mathematics – Transfer pricing is no science
3. Consequence of non-filing of appeal in respect of cases where the tax effect is less than the prescribed monetary limit
4. ITAT clears the air over transfer pricing
5. Dispute resolution panels will allow MNCs to sort out their tax disputes in faster and cost effective manner