Transfer Pricing – CBDT panel to formulate safe harbour provisions

The Central Board of Direct Taxes (CBDT) has set up a
committee to formulate rules for the safe harbour provisions—a set of rules that
would enable the income tax (I-T) authorities to accept the transfer pricing
returns without scrutiny.

Foremost among the committee’s tasks is to set an acceptable
margin which would act as a benchmark for the industry. For example, if the safe
harbour rules stipulate that the margin in a particular industry is 20%, and if
the transfer price declared by a company engaged in that industry is not less
than the margin, the I-T authorities would accept the return without questions.

The rules, once introduced, will lend an investment friendly
image to India. It will also put an end to the requirement of collecting huge
amounts of data regarding transfer pricing transactions, thereby saving time and
energy.

(Source: The Economic Times, dated 11.01.2010)