jueves, 8 de septiembre de 2016

Indian tribunal rules on adjustments in relation to interest-free loans from foreign parent to Indian subsidiary

A three-member special bench of India’s Income Tax Appellate Tribunal issued an important ruling on July 15 in the case of Instrumentarium Corporation Limited, Finland, on the basics of transfer pricing. The special bench concluded in its ruling that the transfer pricing regime in India’s tax laws does not support the contention that if a foreign company is taxed on the same income on which the Indian associated enterprise (AE) is to be allowed a corresponding deduction, it will erode the tax base in India.
The ITAT also ruled that Section 92(3) of the Income Tax Law indicates that what is relevant is the impact on profits or losses for the year under consideration, as it is to be computed on the basis of entries made in the books of accounts in respect of the previous year in which the international transaction was entered into. There is no scope for taking into account the impact on taxes for subsequent years.
The special bench further held that:
“[E]ven if it is indeed intent of the legislature that transfer pricing provisions are not to be invoked in the cases where there is lowering of the overall profits of all the associated enterprises connected with the transaction, since the words of the statute do not translate this intent into the law, it cannot be open to us to hold that in the light of the legal provisions as they stand embodied in section 92(3) of the Act, transfer pricing provisions are not to be invoked when, as a result of the structuring of a transaction in a particular way, there is no erosion of Indian tax base…”
Source & more info: Deloitte 

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