Tax Department signs 7 unilateral advance pricing agreements to reduce litigation

The Tax Department on Friday signed seven more unilateral Advance Pricing Agreements (APAs) with taxpayers with an aim to reduce litigation.

"This takes the tally of APAs signed so far to 39 (38 unilateral and one bilateral). In the current fiscal year, which is the third year of APA programme, 30 agreements have been signed so far. Before the end of the financial year, more such agreements are expected to be signed," the Finance Ministry said in a statement.

APA, introduced in the Income Tax Act in 2012, provides for signing of an agreement between a taxpayer and the IT department on an appropriate transfer pricing methodology for determining the value of assets and ensuing taxes on intra-group overseas transactions.

The seven APAs signed by the Central Board of Direct Taxes (CBDT) with taxpayers pertain to various sectors of the economy like investment advisory services, manufacturing, software development services and IT enabled Services.

The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Since its inception, the APA scheme has attracted tremendous interest from taxpayers for using this mechanism to achieve tax certainty upto nine years.

The approach of the Income Tax Department to the APAs has been appreciated and acknowledged by the industry in India and abroad, it said. The Income Tax Department is committed to providing a stable and predictable taxation regime and improving the ease of doing business, it added.