Introduction - Advance Pricing Agreement - International Taxation - Income Tax

Introduction - Advance Pricing Agreement The Transfer Pricing provisions were introduced in India in 2001 which provided for determination of arm's length price in cases of international transactions between associated enterprises. In order to provide tax certainty and unanimity in approach in international transactions between associated enterprises, the Finance Act, 2012 has inserted sections 92CC and section 92CD in the Income Tax Act 1961 (in short 'the Act') introducing the provisions of Advance Pricing Agreement (APA). The APA process is voluntary and will supplement appeal and other Double Taxation Avoidance Agreement (DTAA or in short 'Treaty') mechanism for resolving transfer pricing dispute. The legislation stipulates that Central Board of Direct Taxes (in short 'the Board') can enter into an agreement with any person, with the approval of Central Government, determining the arm's length price (ALP) or specifying the manner for determination of the ALP in relation to an international transaction to be entered into by that person. The Board has prescribed an Advance Pricing Agreement Scheme (Rules '10F to 10T' of Income Tax Rules, 1962) in this regard vide notification No. 36/2012 dated 30.08.2012. The relevant provisions of the Act and Rules are available in the appendix of this guidance note.