The Central Board of Direct Taxes (CBDT) has signed four additional unilateral advance pricing agreements (APAs) with Indian taxpayers as it looks to reduce litigation by providing certainty in transfer pricing. The four APAs signed pertain to diverse sectors that is manufacturing, financial and information technology sectors of the economy.
The international transactions covered in these agreements include contract manufacturing, IT-enabled services and software development services. With this, the total number of APAs entered into by the CBDT has reached 130 which includes eight bilateral APAs and 122 unilateral APAs. A total of 66 APAs (5 bilateral APAs and 61 unilateral APAs) have already been entered into, in the current financial year. The tax department expects more APAs to be concluded and signed before the end of the current fiscal.
Meanwhile, the APA scheme was introduced in the Income-tax Act in 2012 and the rollback provisions were introduced in 2014. The scheme aims to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the prices of international transactions in advance.