MNCs queue up for pact with I-T

The programme allows the company and the tax department to decide on an appropriate transfer pricing methodology for determining the price and ensuing taxes on intra-group overseas transactions.

These transactions may include interest payments, corporate guarantees, non -binding investment advisory services and contract manufacturing.

The central board of direct taxes had received 146 applications last year and, in an important development, it signed five such agreements for assessment year 2014-15 to AY 2018-19 on Monday.

The development comes at a time when the department is entangled in tax disputes worth several thousand crore with many MNCs including Nokia, Vodafone and WNS.

Tax experts said such agreements will help in improving investor sentiment given the certainty involved.

“The CBDT has taken just one year to achieve this milestone, which by international standard is quite fast… (However) … the APA team has approximately 400 applications pending now and this number may go up in the next year… With the present workforce, the APA team will have very uphill task in maintaining the high standard they have set,” said SP Singh, senior director, Deloitte Haskins and Sells.

During the five-year period, the taxpayer is required to file an annual report to confirm compliance with the terms of the APA. The tax authorities shall then conduct limited audit of the taxpayer to ensure compliance.