1

Recent Transfer

Pricing (TP)

Developments &

Controversies in India11 November 2016

2

Table of contentAgenda

- Latest developments as per Finance Act 2016

- Safe Harbour Rules

- Base Erosion and Profit Shifting (BEPS) TP

Update

- Advance Pricing Agreements (APAs) in India –

Experiences to Date

- Challenges and acceptability of Functions,

Assets and Risks (FAR) Analysis

- Recent Important decisions

3

Latest developments as

per Finance Act 2016

4

CbCR – part of TP documentation & reporting

• Transfer pricing documentation and reporting aligned to OECD BEPS Action Plan 13

Master File - containing standardized information relevant for all MNE group members

• Section 92D on transfer pricing documentation requirements modified – requires persons to maintain

master file

— Threshold, due date and detailed list of information to be maintained, to be prescribed via Rules

Local File - referring intra-group transactions of the local taxpayer

• Local file related regulations that already exist in the law may continue or be aligned to the

recommendations of the OECD

• Detailed Rules to be notified at a later date

Applicable from Financial Year 2016-17 onwards

5

CbCR reportingCbCR

• Section 286 inserted – introducing CbCR-

— India headquartered MNCs to furnish CbCR along with the return of income before due date i.e. 30

November 2017

— Indian subsidiaries of Foreign headquartered MNCs / Permanent Establishments (‘PE’) in India obliged

to furnish CbCR in certain cases

• Stringent penalty leviable for failure to furnish the CbCR / master file.

• Indicative threshold – EUR 750 mn / INR 5,395 crores* / USD 805 mn# group consolidated turnover of the

preceding financial year, i.e. FY 2015-16* 1 EUR = 71.9 INR # 1 USD = 67 INR

• Reporting obligation on Indian parent entity of an international multinational group or local constituent entity

or PE

• Local constituent entity / PE in India required to furnish CbCR to the prescribed authority if the parent entity

of the group is resident:

— in a country with which India does not have an arrangement for exchange of the CbCR; or

— such country is not exchanging information with India even though there is an agreement; and

— this fact has been intimated to the entity by the prescribed authority;

PE is obliged under the above provisions only if separate financial statements are prepared for the PE

6

Stringent Penalties prescribed

Penalty for CbyC report: Delay upto one

month

Delay beyond one

month

Delay in payment of

penalty after receipt of

instructions to pay

Failure to furnish CbyC

report by the due date of

filing of return of income

INR 5,000 (USD 75)

per day

INR 15,000 (USD 230)

per day

INR 50,000 (USD 750)

per day

Failure to furnish

additional information and

documents sought by the

Revenue authorities

INR 5,000 (USD 75) per day from the day on

which the period for furnishing the information

information and document expires

INR 50,000 (USD 750)

per day

Inaccurate information

filed under the CbyC report

(Penalty to be levied based

on certain conditions)

INR 500,000 (USD 7500)

Failure to furnish the Master file (as may be prescribed in rules) by the due date will attract penalty of

INR 500,000 (approx. USD 7,500).

7

Other Penalty provisionsSection 270A

Pursuant to a TP adjustment, following penalty provisions have been proposed:

• Penalty at 50 percent of the tax payable on under-reported transaction

• Penalty at 200 percent of the tax payable on misreporting of transaction

Applicable AY 17 -18

Section 270A(6)(d)

The under-reported income shall not include any addition made by the TPO, where the assessee had

• maintained information and documents as prescribed under section 92D,

• declared the international transaction under Chapter X, and,

• disclosed all the material facts relating to the transaction; and

270A(9)(f) - Misreporting includes – failure to report any international transaction or any transaction

deemed to be an international transaction or any specified domestic transaction, to which the provisions

of Chapter X apply.

8

Other TP proposals

Timeline for completion of TP assessment proceedings reduced by three months

Section 153

Period of completion of assessment where the matter is referred to TPO by the AO

Reduced from 36 months to 33 months

The right of the AO to appeal against the DRP order withdrawn

w.e.f. 01 June 2016.

Amendment in Section 253

Amendment in Section 92 CA

Where completion of assessment proceedings is stayed in case of

(i) an order / injunction of any court

(ii) Competent Authority’s reference for exchange of information

period for completion of TP assessment shall be minimum sixty days.

Crux - If the time available to the TPO for making an order after excluding the time for which assessment proceedings were stayed or the time taken for receipt of information, as the case may be, is less than 60 days, then such remaining period shall be extended to 60 days

9

Safe Harbour Rules

10

Rule 10TA to 10TG Safe Harbour Rules • “Safe harbour” - Circumstances in which the revenue authorities shall accept the transfer price

declared by the assessee

• Introduced in India by Finance (No.2) Act, 2009 w.r.e.f. 1.4.2009 and new Section 92CB inserted in

the Act

• Rangachary Committee had submitted six reports for various sectors

• Final Safe Harbour Rules were released on 18 September 2013

• The option of being governed by Safe Harbour Rules shall be valid for a period of five years or for a

lesser period, starting with AY 2013-14

Safe Harbours generally aim to provide certainty, administrative simplicity and reduced

litigation

11

Intercompany Transaction Value of Intercompany Transaction Safe Harbour

Software Development (IT) or

Back-office support Services

(ITES)

• Upto INR 500 crores

• Exceeds INR 500 crores

• Cost plus 20% or higher

• Cost plus 22% or higher

Knowledge processes outsourcing

services (KPO services), with

insignificant risks

• No monetary limit • Cost plus 25% or higher

Intra-group loan to wholly owned

subsidiary

• Upto INR 50 crores

• Exceeds INR 50 crores

• SBI base rate plus 150 bps

• SBI base rate plus 300 bps

Corporate guarantee • Upto INR 100 crores

• Exceeds INR 100 crores and the

credit rating of the AE is of the

adequate to highest safety

• Commission @ 2% or higher

• Commission @ 1.75% or

higher

Contract R&D services for

software development

• No monetary limit • Cost plus 30% or higher

Contract R&D services for

pharmaceutical drugs

• No monetary limit • Cost plus 29% or higher

Manufacture and export of core

auto components

• No monetary limit • Cost plus 12% or higher

Manufacture and export of non-

core auto components

• No monetary limit • Cost plus 8.5% or higher

Safe Harbour Margins

12

Safe Harbour Rules – Experiences• Safe Harbour Margins – appear higher than the Arm’s Length Price ordinarily computed

• No adjustments permitted to taxpayers opting for Safe Harbour

• No benefit of range

• Use of different benchmarks – SBI Vs. LIBOR

• Guarantee fees – ad-hoc Vs. benefit to borrower

• No respite is provided from maintenance of mandatory documentation

• Valid for a period of five years starting with AY 2013-14 or for a lesser period at the option of the

taxpayer

• Exposure to possibility of economic double taxation

• Once option exercised, not allowed to opt for MAP proceedings

• Due to apprehension in various industry sectors - Government has issued instructions that Safe

Harbour margins not to be followed for general Audit or APA purposes.

Tepid Response received

BEPS TP Update

14

Action Plans - 8 – 10 – Intangibles

The entities within a multinational group which are entitled to share in returns derived bythe group from exploiting intangibles are those entities making the following contributions

The entity(ies) controlling / performing development,

enhancement, maintenance, protection and exploitation

(DEMPE) functions in relation to the intangibles

The entity(ies) controlling risks and having the financial

capacity to assume risks associated with the DEMPE of the

intangibles

The entity(ies) providing funding for the intangibles and relevant

DEMPE functions

Function

Risks

Funding

• Objective

• Prevent BEPS that may result from abuse of TP rules related to cross-border relocation of

intangibles and other transactions involving use of intangibles

• Ensure that transfer pricing outcomes are in line with 'Value Creation”

15

Action Plans - 8 – 10 – Intra Group ServicesObjective - Focus on developing rules to prevent BEPS through the use of transactions (management fees, head

office expenses etc) which would not, or would only very rarely, occur between independent parties

LVIGS - Services of supportive nature and not a part of core business of the Group* / do not require the use of or

lead to the creation of valuable and unique intangibles / nNo assumption, control or creation of substantial or

significant risk

It is pertinent to understand the nature of the services in order to classify them as LVIGS. The LVIGS should be

supportive in nature and should not form part of the core business of the MNE group.

* business of the Group and not of the legal entity providing the service

The following activities are likely to meet the definition of

LVIGS

The following activities would not be considered LVIGS

Accounting and auditing Services relating to the core business of the Group

Processing and management of account receivable and

account payable

R & D, manufacturing and production services

Human resource related activities Sales, marketing and distribution activities

Monitoring and compilation of data relating to – health, safety,

safety, environment etc

Financial transactions

Information technology services Insurance and reinsurance

Internal and external communication and public support

services

Extraction, exploration or processing of natural resources

Legal services / activities relating to tax obligations / general

services of administrative or clerical nature

Services of corporate senior management

Not endorsed by India in the UN TP Manual !!

16

Action Plan 13 - TP Documentation

CbC Report

● Objective: Prioritize Audit Issues

● Approach: Summary data by jurisdiction (revenue, income,

taxes) & indicators of economic activity within

Who prepares?Ultimate Parent who Consolidates

Master file

● Objective: Risk Assessment & Possible Exposures

● Approach: Multinational group and business details of all

“material” cross-border related party transactions

What gets covered?All transactions of ALL Consolidated

Local file

● Objective: Appropriate considerations in setting transfer prices

● Approach: Provides additional detail on the operations and

transactions relevant to that jurisdiction

What is different? Local file focus - jurisdictional nuance

These three documents together are a taxpayer’s key tools for

managing transfer pricing risk – Consistency Imperative!!!

17

CbCR RequirementsWhile the primary purpose of the CbCR is to provide information to a tax authority to enable it

to undertake a transfer pricing risk assessment, it is acknowledged that the data will be used

to assess wider BEPS related risks.

The country-by-country report requires aggregate tax

jurisdiction wide information relating to the global

allocation of:

— The income;

— The taxes paid;

— Certain indicators of the location of economic

activity among tax jurisdictions in which a

group operates;

— Listing of all the Constituent Entities for which financial

information is reported, including the tax jurisdiction of

incorporation, where different from the tax jurisdiction of

residence, as well as the nature of the main business

activities carried out by that Constituent Entity.

The CbCR contains

information not

previously provided

to tax authorities.

Tax Jurisdiction

Constituent entities

resident in the tax

jurisdiction

Tax jurisdiction of

organisation or

incorporation if different

from tax jurisdiction of

residence

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18

Master file requirementsThe Master File should provide an overview of group’s business. The objective is to explain a

groups’ transfer pricing policies in the context of its global economic, legal, financial and tax

profile. The Master File should include a high level overview of a group, covering the following topics:

— A description of the business including:

- Important drivers of business profit.

- Description of the supply chain (for five largest plus those that represent more than 5% of turnover).

- Description of the main geographies.

- Important intra-group services.

- Functional analysis describing principal contributions to value creation.

- Important business restructurings.

- Organisation structure.

— Intangibles including:

- Group’s strategy for the development of intangibles.

- A list of important intangibles.

- Agreements relating to intangibles.

- Transfer pricing policies related to Research and Development and intangibles.

- Important transfers of intangibles.

— Intra-group financial activity including:

- How the group is financed.

- Identification of central financing companies.

- Transfer pricing polices relating to financing.

— Financial and tax positions including:

- Consolidated financial statement.

- Unilateral Advanced Pricing Agreements (APAs); and other tax rulings relating to the allocation of

income.

The Master File

contains some new

information not

previously provided

to tax authorities.

19

Local file requirements

The content of the Local File helps to demonstrate that the taxpayer has complied with the

arm’s length principle in its material intra-group transactions.

For each jurisdiction, the Local File should contain:

— Description of the management structure, business strategy, business restructurings, key

competitors.

— For each material category of controlled transactions:

- Description of material controlled transactions and context of transaction.

- Intra group payments for each category by jurisdiction of counter-party, identifying relationship

between counterparties.

- Copies of material intra group agreements.

- Detailed comparability and two sided functional analysis including any changes to prior years

(can be cross-referenced to Master File).

- Most appropriate transfer pricing method and tested party.

- Important assumptions in applying the transfer pricing methodology.

- Reasons for performing a multi-year analysis (if relevant).

- List and description of Comparable Uncontrolled Prices (‘CUPS’) if any, search methodology

and financial indicators of comparables.

- Comparability adjustments.

- Reasons for concluding transaction was conducted on arm’s length basis.

- A summary of the financial information used in applying the transfer pricing method.

- A copy of existing APAs and other tax rulings which are related to the controlled transactions

(but don’t involve the local entity).

— Financial information for local entities, including local financial accounts and reconciliation

between information used for transfer pricing, financial statements and financial data for

comparables.

The Local File is

closely aligned with

what companies

already prepare.

20

APAs in India –

Experiences to Date

21

APA Program in India – Salient Features…• Types: Unilateral, Bilateral, Multilateral - Option to get Unilateral APA converted to Bilateral / Multilateral

• Can be entered into for: either determining the arm’s length price (‘ALP’) or specifying the manner inwhich the ALP is to be determined

• Coverage: Ongoing transactions as well as proposed transactions

• Validity: up to 5 years (renewal possible for up to additional 5 years); Rollback option available for prior4 years

• Pre-filing consultation: Optional, Anonymous filing possible to gauge views of APA authorities

• Rollback of APA: Covers previous 4 years - withdrawal of rollback application possible

• Specified formats: for Pre-filing, Main APA and APA Rollback application

• The APA team may include a panel of experts such as Economists, Statisticians, Lawyers, etc. - ifnominated by the Director General – International Taxation

• Prescribed compliance: Annual compliance report followed by compliance audit

• TP audits: no regular audits, relatively simple annual compliance audit

• Taxpayer can withdraw/ renew the APA application

APA is an Effective Controversy Management tool

22

• APA is applicable for 5future years and rollbackfor 4 previous years.

• “Rollback” - Application ofnegotiated position underan executed APA to prioryears

• Potential effect on prioropen years in litigation.

• Renewal of APA for further5 years

• Reduced documentationburden

APA (For 5 Future Years)

APA Rollback(For 4 Previous

Open Years)

FY 2015-16

FY 2012-13

FY 2013-14

FY 2014-15

FY 2016-17

FY 2017-18

FY 2018-19

FY 2019-20

Rollback agreements

could have

persuasive value for

prior years in

litigation

Renewal of APA

(For 5 Future Years)

FY 2020-21

APA as an option – Why?APA as an option

23

Experiences with the APA authorities • Pragmatic and fact-cognizant approach; cordial and non-intrusive

• Focus is on in-depth understanding of the business and the nature of the services rendered by Indian

entity in the overall supply chain

• Strong emphasis on establishing and mutually agreeing on detailed analyses to mitigate subjectivity

by field officers

• Flexible and open-minded to fair suggestions regarding the potential practical challenges in

implementation of proposed terms in agreements

• Fair progress on ground also on Bilateral APA discussions

24

Status of APAs – Key Milestones1st Year of APA filings (2013) 2nd Year of APA filings (2014)

146 Applications* 232 Applications*

117Unilateral 29 Bilateral 205 Unilateral 27 Bilateral

3rd Year of APA filings (2015)

204 Applications**

192 Unilateral 12 Bilateral

Source : *Annual Report 2014-15 – Ministry of Finance **Article in Business Standard dated 18 April 2016 #CBDT Press release dated 27 October 2016

0

10

20

30

40

50

60

70

80

90

100

FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 TOTAL

5 4

55

44

108

5 3

53

43

104

0 1 21

4

Total APA Unilateral APA Bilateral APA

Total APAs signed till October 2016#

4th Year of APA filings (2016)

130 Applications**

118 Unilateral 12 Bilateral

25

Challenges and

Acceptability of a FAR

26

Issues and Challenges involved in a FAR

• Bedrock of a TP analysis

• Level of Detail

• Rights and Obligations – Contractual vs Actual Conduct

• Importance of People Functions – Ability to manage risks

• Financial capacity to undertake risks

• Impact of BEPS

27

Recent Important

Decisions

-Advertising, Market Promotion

(AMP) Issues

- Corporate Guarantee

- Base Erosion and TP

28

Marketing Intangibles (AMP expenses) Issue involved / Approach of the Revenue

• Legal owner of the intangible e.g. brand is the foreign associated enterprise (AE)

• Assessee (Indian co.) spends significant amount on AMP expense - creates marketing intangibles

without corresponding compensation / reimbursement from the AE

• Revenue authorities compare AMP expense to sales ratio of assessee with other comparables –

disallows AMP expense in excess of “bright-line” as TP adjustment alleging contribution by taxpayer is

towards strengthening AE owned brands.

• Expectation of mark-up on recovery of AMP expense in excess of bright line. The average AMP

expenses incurred by companies in the industry is considered as Bright Line for the purpose of TP

analysis.

ExcessAssumed to be incurred for

strengthening brand name

of foreign AE

Indian licensee:

Must be reimbursed along

with suitable profit mark-up

AMP spend by

Indian licensee

Arm’s length

licensee

expenditure

(-)

Bright line

Bright line method adopted

by relying on US Tax

court case in DHL

29

The Three Different Views

IssueMaruti Suzuki ruling

(2015 Delhi HC)

Sony Ericsson ruling

(2015 Delhi HC)

LG Special bench

ruling

(2013 Delhi ITAT

Special Bench)

AMP expense

constitutes an

international

transaction

• AMP expense not an

international

transaction as

application of BLT is

not permissible under

transfer pricing

regulations

• AMP expense is an

international transaction

as marketing and

distribution function

performed towards related

party

• AMP expense is an

international

transaction

Application of

bright line test/

Bifurcation of

expense into

routine versus

non-routine

• Relying on the Sony

Ericsson ruling,

application of BLT

rejected

• Application of bright line

test and concept of non-

routine AMP expense

rejected

• Bright line expense is

a tool to bifurcate

AMP expenses into

routine and non-

routine

Transfer pricing

approach

• If payment of royalty

and import of raw

materials tested

separately, no

additional benefit

flowing by way of AMP

expense

• AMP function is closely

linked to and a part of

overall distribution activity,

can be aggregated for TP

analysis

• Purchase of goods

and AMP expense

are separate

transaction and

cannot be

aggregated

30

The Three Different Views

IssueMaruti Suzuki ruling

(2015 Delhi HC)

Sony Ericsson ruling

(2015 Delhi HC)

LG Special bench ruling

(2013 Delhi ITAT Special

Bench)

Set off permissible /

aggregation of

transactions

• In consonance with

Rule 10B, no

adjustment

warranted as the

margins of the

taxpayer is higher

vis-à-vis

comparables by

application of the

TNMM

• Distribution of goods

and marketing are

closely linked

transactions. Hence, no

adjustment warranted if

taxpayer remunerated

adequately by higher

margins on the

distribution of goods

• AMP function to be

separately

compensated even if

higher profitability in the

distribution function

Economic

ownership on

intangibles

• Concept of economic

ownership

appreciated

• Concept of economic

ownership appreciated

• Concept of economic

ownership rejected

31

AMP expenses - Litigation updateMaruti Suzuki / Sony Ericsson: 8 questions raised

before SC (Oct 2016)

• AMP Expenses – treated and characterised as

international transaction?

• Independent distributor / licensed manufacturers –

promotion of brand necessarily be a matter of

negotiation and not necessarily be reduced to writing as

part of an agreement?

• Was HC right in stating – existence of international

transaction cannot be arrived at from intercompany

agreement?

• Under Chapter X – can adjustment be made in respect

of expenditure treated as AMP expenditure?

• Was HC right in holding that Income Tax Act does not

have machinery provision to benchmark the international

transaction arising from AMP expenses?

• Was HC right in rejecting the Bright Line Test?

• Was HC right in holding that the benefit to AE was only

incidental and not intentional?

• Was HC right in holding that if TNMM demonstrates that

transactions are at ALP – no adjustment warranted –

ignoring the separate benchmarking of each

international transaction?

Brand

Creation /

Marketing

Intangible

Indian Company

Foreign Company

Excessive

AMP

Expenses

Owner of

Brand

In India

Outside India

32

Marketing Intangibles – UN Manual – India

ChapterKey Points

• Detailed FAR analysis essential to ascertain functions being carried out by the Indian

taxpayer in relation to AMP

• If foreign licensor is benefitting from the above AMP functions - Indian entity to be

remunerated at arm’s length

• Acceptance and acknowledgement of the concept of ‘Economic Owner’ in the hands of

the Indian licensee entity

• Economic Owner – Evaluation of the intention to perform AMP functions imperative – to

increase domestic profits or global sales

• Distributors – acceptance of the principles laid down in Sony Ericsson

Acceptance of key TP principles – a Welcome Approach

Implementation of the above could substantially reduce litigation!!

33

Corporate Guarantees• Corporate Guarantee is a legally binding agreement under which the guarantor agrees to pay any or all

of the amount due on a loan instrument in the event of non payment by the borrower.

• No charge for guarantee fee on the ground that there is no cost of guarantee

• Comfort Letters are also viewed as an form of Guarantee

• Granting of interest free loans has historically led to tax controversies with the Revenue authorities

Taxpayer’s Approach

• If akin to an investor / shareholder activity - no fees attributed

• If akin to services - fee attribution made

• Benchmarking fees on basis of mutual agreement / bank quotes

Tax Department’s Approach

• Insistence on arm’s length compensation for giving guarantee, as AE avails benefit in form of reduced

interest rates / favourable terms

• Domestic interest rates are used as potential benchmarks

• Information available in the website of Indian banks generally considered

• Guarantee fee in range of 3 to 5 percent considered resulting in TP adjustments

34

Case Key points

Tega

Industries

Kolkatta ITAT

(2016)

Corporate guarantee provided by an Indian company to a financial institution for

extending a loan to a foreign subsidiary company (SPV) for acquiring step down

operating subsidiaries adjudged as a shareholder service

The ITAT has taken into consideration the guidelines of the Australian Tax Office (92/11);

OECD; and UK HMRC to hold that in the instant case, no third party financier would have

lent money to the SPV, having regard, to its skewed debt-equity ratio, without guarantee

been extended by the taxpayer

ITAT appreciated that the taxpayer’s expectations from provision of loan and guarantee

are not to earn a market rate of interest or guarantee fee, rather, the expectation was of a

shareholder to protect its investment interest and help it achieve acquisition of South

African entities for furtherance of its own business interest

Accordingly, the loan was considered to be as quasi-equity and guarantee a shareholder

service meriting no charge

Provision of guarantee free of charge Corporate Guarantees – Case Law

35

BEPS and TP– Case LawInstrumentarium Corporation Limited,

Finland

Facts of the case

• The taxpayer - ICL Finland – is a non-resident engaged in the business of

medical equipments advanced interest free loans to its India subsidiary –

Datex India

• AO computed the arm’s length interest that should have ben charged by ICL

Finland and made a TP adjustment in the hands of ICL Finland to that effect

• The said adjustment was upheld by the CIT(A)

• It should be noted that ICL Finland had approached the AAR – for this

transactions – however the AAR had declined to comment on the matter

considering that this involved determination of ALP which would outside their

purview

Instrumentarium Corporation Limited,

Finland – ICL - Finland

Datex Ohmeda India Pvt Ltd – Datex India

ICL - Finland

Datex India

Wholly

owned sub

India

Finland

Business of

manufacturin

g and selling

medical

equipment

Dispute

• Whether, on the facts and in the circumstances of the case, an ALP

adjustment was required to be made in respect of the interest free loan

granted by the taxpayer, a non-resident company, to its wholly owned

subsidiary in India?

36

Case Key points

Instrumentarium

Corporation

Kolkatta ITAT

(Special Bench

2016)

Sec 92(3) requires independent computation in ALP in the hands of each taxpayer and

not a holistic view considering the taxpayer and its AE

Sec 92(3) considers each year on a standalone basis

If an ALP adjustment is made in the hands of the foreign taxpayer – the Indian AE shall

not be entitled to get a corresponding adjustment in respect of the same

Taxpayer’s reliance on the Australian law (to give discretion for application of ALP and

grant consequential adjustments) is unwarranted - considering the difference in the TP

regulations in the two countries

CBDT circular no. 14 of 2001 is not an ‘order, instruction or direction’ (as referred in

section 119) which binds the field officers, but is in the nature of an explanatory note

providing guidance during the introduction of TP provisions in India

‘Intent of legislature’ at best comes into play only when there is ambiguity in the words

of the status sought to be interpreted - which was not so in the instant case – hence no

need to resort to the above Circular

Provision of guarantee free of charge BEPS and TP– Case Law

Base Erosion theory’ – rejected in principle - could have

repercussions not only on financial transactions (i.e. loans and

guarantees), but also to wider classes of transactions!!!

37

Abbreviations and

Acronyms

38

Abbreviations Full Name

AE Associated Enterprise

ALP Arm’s Length Price

AMP Advertising, Market Promotion

AO Assessment Officer

APA Advance Pricing Agreement

AY Assessment Year

BEPS Base Erosion and Profit-Shifting

BLT Bright Line Test

CbCR Country-by-Country Reporting

CBDT The Central Board of Direct Taxes

FAR Functions, Assets and Risks analysis

HC Hon’ble High Court

HMRC Her Majesty of Revenue and Customs

IGS Intra-Group Services

INR Indian Rupee

IRA Indian Revenue Authorities

ITAT Hon’ble Income Tax Appellate Tribunal

Abbreviations and AcronymsAbbreviations Full Name

ITeSInformation Technology Enabled

Services

KPO Knowledge Processes Outsourcing

LIBOR London Interbank Offered Rate

LVIGS Low value-adding intra-group services

MAP Mutual Agreement Procedure

MNE Multinational Enterprise

OECDOrganization for Economic Cooperation

and Development

SBI State Bank of India

SPV Special Purpose Vehicle

The Act Income-tax Act, 1961

TNMM Transactional Net Margin Method

TP Transfer Pricing

TPO Transfer Pricing Officer

USD United States Dollar

UK United Kingdom

Thank You

Waman Kale

Partner – BSR & Co. LLP

T: +91 22 3090 2756

Mob: + 91 9820013834

Email: wkale@bsraffiliates.cm