New ‘safe harbour’ rules to curb transfer pricing disputes

As a part of the draft safe harbor rules announced Wednesday, the Indian government gave conditional exemption to multinational corporation’s transactions with their Indian setups from being quizzed on concealment of tax. The new strictures come in the wake of rising instances of taxation related disputes with MNCs. The draft rules are likely to reduce such litigation with foreign companies. Aim to Reduce Litigation 'Safe Harbour' refers to instances where the income-tax authorities will agree to the transfer price declared by the assessee and will not get into further investigations. "These rules will provider certainty...The idea is to ensure there is less litigation," said revenue secretary Sumit Bose. In recent times, companies like Shell and Vodafone were slapped legal notices by taxation authorities. The authorities alleged that these multinationals undervalued the sale of shares in cross-border transactions. The issue of transfer pricing has hogged the limelight ever since. M

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