The Tax Publishers

FINANCE BILL, 2017

Budget 2017--Counterparty Adjustment Under TP Provisions

Srivatsan Ranganathan

Under Indian transfer pricing provisions for the present there is no facility to avail/invoke counterparty adjustment. By counterparty adjustment we mean if the arms length price of a transaction of an assessee is questioned and additions made to the assessees income, then we are entitled to make corresponding adjustments in the tax position of the Associated Enterprise (AE). The learned author discusses the amendment relating to counterparty adjustment proposed in the Finance Bill, 2017. Earlier two articles of this author on the subject topic viz. Counter Effect Adjustments Override of Treaty Over TP Law and Counterparty Adjustment in Transfer Pricing Vis-a-vis Relief Through DTAA may also be referred to for better appreciation of the said topic.

Budget 2017 has brought in Section 92CD giving the power to make counterparty adjustments (called secondary adjustments) under Indian Transfer Pricing Provisions. To note the power to make counterparty adjustments under DTAA already exist but this was recently watered in the Ahmedabad ITAT decision of Shell Global Solutions International BV v. DDIT [ITA Nos. 2933/Ahd/2011, 2841/Ahd/2012, 486/Ahd/14 and 273/Ahd/2015] assessment years 2007-08, 2008-09, 2009-10 and 2010-11, dated 17th November, 2016 [2016 Taxpub(DT) 4823 (Ahd I-Trib) : (2016) 182 TTJ (Ahd-Trib) 830.

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