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K.R.Srivats

New Delhi, Oct 18 The Central Board of Direct Taxes (CBDT) has sought to dispel the notion that the tax department was “very aggressive” in effecting transfer pricing adjustments (usually upward revision to the prices of cross-border transaction) on the audit cases coming up before them.

In India, audit trigger is based on the aggregate value of cross-border transactions. Transfer pricing cases exceeding Rs 15 crore are referred to transfer pricing officers for detailed examination and computation of arm’s length price. The transfer pricing regulations came into force from April 1, 2002.

“Tax department is not very aggressive. In a recent survey, India was found in sixth rank in aggressive TP practices. We are making adjustments only in 24 per cent of the audit cases, far behind the international standard of 37 per cent,” Mr S.K. Mishra, Director, International Tax (Transfer Pricing), said at an international tax conference, organised by PHDCCI here.

He was responding to observations that the tax department was very aggressive in transfer pricing adjustments and that large scale adjustments were being made to garner revenues.

Mr Mishra said the CBDT had not fixed any revenue target for the field formations under transfer pricing. He noted that in the last three years of transfer pricing audits, the department had made “adjustments” to the tune of Rs 6,800 crore, refuting claims of a tax expert at the conference that the overall adjustments could be about Rs 70,000 crore.

The CBDT official also highlighted that the transaction net margin method (TNMM) was the preferred method for assesses. “An internal analysis of all TP reports filed in Delhi office showed that assesses had used TNMM in more than 92 per cent of the cases. We are using TNMM because you (assesses) are using TNMM. We don’t have any information about your segmental accounts,” he noted.

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