CBDT enters into advance pricing agreements

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Anotification from the Central Board of Direct Taxes (CBDT) on 3 April said it had entered into 14 unilateral advance pricing agreements (UAPAs) and two bilateral advance pricing agreements (BAPAs) in March.

As per section 92CC of the Income Tax Act, 1961, an advance pricing agreement (APA) is an agreement entered into between a taxpayer and tax authority (UAPA in case of one tax authority, BAPA in case of two tax authorities and multilateral in case of multiple tax authorities), in order to predetermine the transfer prices and avoid future transfer pricing disputes with the tax authority. With the agreements reached in March, the total number of APAs that the country has entered into increased to 199 UAPAs and 20 BAPAs.

The latest BAPAs were entered into with the US, while the UAPAs pertain to industries including telecommunications, information technology, automobile, pharmaceutical, beverage, trading and banking, finance and insurance.

The international transactions covered in these agreements included payment of royalty fees, provision of business support services, provision of corporate guarantees, contract manufacturing, provision of marketing support services, provision of engineering design services, provision of engineering support services, trade of agro commodities, import/export of components and provision of IT services.

The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.