The government so far has resolved 35 transfer pricing disputes with US-based multinational companies in the software development and services sector (IT and ITeS), while around 100 disputes are likely to be settled in the next three months under an arrangement with the US. Recently, a framework agreement was signed between the two nations under the Mutual Agreement Procedure (MAP) provision of the India-US Double Taxation Avoidance Convention (DTAC) which helped in resolving the transfer pricing disputes. Under this agreement during the current year around 200 past disputes are to be resolved between the two countries in IT services and ITeS segments calling it a major positive development in tax dispute resolution.
This framework agreement has helped India in signing of bilateral Advance Pricing Agreements (APAs) with US where APAs settle transfer prices and the methods of setting prices of international transactions in advance. The Central Board of Direct Taxes (CBDT) said 'The Government is committed to conclude a large number of APAs to foster an environment of tax cooperation and certainty”.
In order to reduce tax litigation, the government is also signing agreements with large companies on the principles of calculating the taxable income arising from their local operations. These initiatives will in future provide stable tax environment to foreign investors doing business in India. The MAP programmes with other countries like Japan and UK are also progressing very well with regular meetings and resolution of past disputes.