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Money > Business Headlines > Report June 4, 2001 |
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CII for flexibility in transfer pricing normsBS Economy Bureau The Confederation of Indian Industry has asked for flexibility in the transfer pricing regulations, issued by the Central Board of Direct Taxes. Many aspects of the rules needed to be kept flexible to ensure easy compliance, the chamber said. "Some of these aspects included determination of the arm's length price, comparability of transactions, information regarding associated enterprises and the documentation requirements," the CII said. Welcoming the CBDT's approach of seeking corporates' views on the draft rules, the chamber said, it would ensure non-hampering of international transactions. The method to be adopted for determining the arm's length price should be left to the assessee. The ideal method, the chamber said, would be to allow the assessee a price-band, instead of a single price, within which the international transaction should remain. In the US, for determination of the arm's length price, acceptable quartile ranges have been prescribed. Given the complexities in arriving at the correct arm's length price under transfer pricing norms, the chamber said, it would be better to allow a range of acceptable arm's length prices. In certain transactions, which are entered into solely with associated enterprises - especially in agreements between companies for undertaking research and development in technology-intensive sectors - finding the price charged in a comparable uncontrolled transaction was difficult. Suitable clarifications in such cases were required, the CII said. The chamber has also suggested that instead of laying down exhaustive criteria for comparing transactions, it might be kept open so that other subjective criteria evolving with the changing business environment could be adopted. Pointing out that rules also required every person, entering into an international transaction, to maintain the name and address of all associated enterprises with details of the relationship, CII said, it was a difficult rule to comply with especially for the trans-national companies, who keep on re-organising themselves through mergers and acquisitions. The assessee should be asked to maintain the name and address of those associated enterprises with whom it had business transactions during the previous year, it said. On documentation, the chamber said that the volume of documentation and information required to be maintained as prescribed by the rules, would involve a significant cost. YOU MAY ALSO WANT TO READ:
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