India has 3rd largest number of transfer pricing cases: E&Y

With about 3,500 disputes, India has the third largest number of pending cases related to transfer pricing in the world, says global consultancy E&Y.

Transfer pricing is a mechanism used by large companies regarding transaction prices between separate entities of the same group. However, multinationals often misuse the system to transfer profits to their subsidiaries in low tax countries.

Currently, India has about 3,500 disputes related to transfer pricing pending at various authorities, as per data compiled by Ernst & Young from different parts of the world. “… in India at least 1,500 transfer pricing disputes were pending in litigation, as of February 2011. This number has more than doubled in the last 18 months,” it said in a statement today.

[caption id=“attachment_424147” align=“alignleft” width=“380”]  APA is an agreement between the taxpayer and tax authority to determine in advance. Moneycontrol.com[/caption]

E&Y noted that pending disputes on transfer pricing are about 3,500 with Dispute Resolution Panel (DRP), Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal (ITAT). “Based on the current caseload of transfer pricing reviews, the top five jurisdictions (in order) are Japan, Canada, India, Germany and the United Kingdom,” it said.

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

However, in the US, this number is less than six and in countries like New Zealand, Taiwan and Singapore, there are neither any ongoing nor any pending cases for domestic appeal. According to E&Y, taxpayers in India find themselves in the challenging position of documenting and defending their transfer prices as controversy is on the rise, since increasingly well-staffed tax authorities apply more sophisticated and sweeping transfer pricing tools.

Further, E&Y said that companies should pursue tax certainty and evaluate Advance Pricing Agreements (APAs) to better manage the growing geographic footprint of transfer pricing requirements, among others.

Impact Shorts

More Shorts

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

As Trump weaponises tariff, Fed sees a bigger worry: Not jobs, but rising prices in America

APA is an agreement between the taxpayer and tax authority to determine in advance, a set of criteria that would govern the transfer prices for covered inter-company transactions for a fixed period of time.

“As per the Directorate of Transfer Pricing, there is a mispricing of Rs. 67,768 crore in 2010-11 and Rs. 43,531 crore in 2011-12. “In such a scenario, APAs will help in offering taxpayers an opportunity to resolve their transfer pricing issues with the tax authority in a cooperative and mutually beneficial manner and provide certainty on this aspect,” E&Y Partner & Transfer Pricing Leader Vijay Iyer said.

PTI