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New Delhi , Nov. 15

THE Central Board of Direct Taxes may frame separate transfer pricing rules that would be applicable in respect of parties in tax havens.

"This (transfer pricing norms for parties in tax havens) is an aspect that we would have to look into. There may have to be some differentiation in norms between those in normal jurisdictions and those in tax havens," Mr A.J. Majumdar, Joint Secretary, CBDT, said at an international conference on `Investment-friendly tax and corporate law regime,' organised by the Federation of Indian Chambers of Commerce and Industry here.

Tax experts highlighted that the Government may have to frame new definition of "associated enterprises" (different from the definition of associated enterprises in the existing transfer pricing regulations) if separate transfer pricing norms are to be specified for parties in tax havens.

Mr Majumdar also said the tax department proposed to initially use the Centre for Monitoring Indian Economy's database for transfer pricing assessments. Industry and tax experts have been underscoring the need for maintenance of a "credible" database for comparability of transactions.

Transfer price is a price at which transactions between related parties take place in controlled circumstances.

Tax authorities are interested on transfer price of international transactions as they could lead to transfer of profits from a high tax jurisdiction.

Mr Majumdar said the tax department was also looking into the issue of framing norms for cost contribution arrangements (CCA).

A CCA is a framework agreed among business enterprises to share the costs and risks of developing, producing or obtaining assets, services or rights, and to determine the nature and extent of the interests of each participant in those assets, services or rights.

Typically, in cases where the costs borne by one or more participants are too high in comparison to the profits borne by the other participants and the proportion of ownership of property, then the tax authorities can invoke transfer-pricing provisions to reallocate the cost flow.

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