International Business & Transfer Pricing - Concept & Jurisprudence

Book Details

CONTENTS AT A GLANCE

Preface	iii
Introduction	vii

Chapter-1 - International Business
1.1 Origin	1
1.2 The revolution in information, transportation and telecommunication modes	5
1.3 Globalisation	6
1.4 Emergence of MNEs post-World War II	7
1.5 Digitisation	16
1.6 Theories of Transnational Trade	20
1.7 Free Trade - the Contemporary Reality	27
1.8 Imperative of Environment, Social and Governance for MNEs,Governments and Multilateral institutions	30
Chapter-2 - Intra-group business relations and Related Party Transactions in International Business
2.1 Growing volume of Intra-Group Transactions	36
2.2 Intra-Group Transactions under Tax Authority Lens	38
2.3 Types on Intra-group Transactions	38
2.4 The key elements of managing related party transactions include definition, regulation and disclosure, detection and monitoring approval processes and sanctions	39
2.5 Core Issues in Intra-Group Transactions	41
2.6 Conclusion	45
Chapter-3 - Arm's Length Principle and Computation of Arm's Length Price
3. Origin of the Arm's Length Principle	47
3.1 Draft Model, 1927 of the League of Nations	47
3.2 Allocation Model, 1935 of the League of Nations	49
3.3 Present Model Conventions	50
3.4 The Indian Provisions Under Section 42(2) of the Indian Income Tax (Amendment) Act, 1939	51
3.5 Economic Issue	53
3.6 Objects of Auditing the Outcome of Transfer Pricing	55
3.7 Development of OECD Guidelines on Transfer Pricing	60
3.8 Every Tax Avoidance not to Attract Section 482	63
3.9 Implementation of Transfer Pricing Rules Being Country Specific	65
3.10 Accounting and Taxation Implications of Intra-group Transactions	66
3.11 Setting the Transfer Price and its Review by the Tax Authorities	66
3.12 Use of Customs Valuations	72
3.13 Inherent Shortcomings in the Arm's Length Standard for Tax Purposes	77
3.14 Global Formulary Apportionment	80
3.15 Arm's Length Principle after the current OECD project on BEPS 2.0 two pillar proposal to address tax challenges of the Digital Economy	81
Chapter-4 - Transfer Pricing Legislations
Introduction	83
4.1 TP legislations of developed countries	84
4.2 TP legislation of emerging market economies	96
Chapter-5 - TP Legislation in India against the backdrop of OECD Guidelines, the US Regulations and Article 9 of the Model Tax Convention
5.1 106
5.2 Indian Approach to Ascertaining the 'Open Market Value'	114
5.3 The Historical Backdrop to the Need for New Legislation Relating to Transfer Pricing	119
5.4 Major legislative developments from 2001 to 2023 - To curb tax avoidance by abuse of transfer pricing	124
5.5 Extension of the Transfer Pricing Provisions to Specified Domestic Transactions	129
5.6 Objectives of Transfer Pricing Provisions	133
5.7 Cases on Taxation Rights of Market Jurisdictions, Attribution of income to Permanent Establishment, Conditions when CFC can be treated as a Branch and Avoidance of Permanent Establishment Status	186
Chapter-6 - Comparability Analysis
6.1 Benchmark for application of arm's length principle	298
6.2 Articles 7 and 9 of the Model Double Taxation Conventions	299
6.3 Factors for Comparability	301
6.4 Functional Analysis	306
6.5 Aggregation of Transactions	333
6.6 Timing Issues	354
6.7 Losses	368
6.8 Use of Secret Comparables	372
6.9 Internal and External Comparables	375
6.10 Selection of Comparables	379
6.11 Comparability adjustments	386
6.12 Making Comparability Adjustments	388
6.13 Data and Assumptions	399
6.14 Arm's Length Range	403
6.15 Lack of Comparables and the Toolkit devised by the Platform for Enhancing Co-operation on Tax Issues	406
6.16 Commercial databases	411
6.17 Making comparability adjustments	413
6.18 Part III	415
6.19 Application of Profit Split Method	416
6.20 Valuation techniques	416
6.21 Advance pricing arrangements	418
6.22 Part IV	418
6.23 Questionnaire: functional analysis	422
6.25 Cases on Selection of Comparables and Comparability Adjustments	435
6.26 Indian Cases	444

About the Author

S C Mishra & S P Singh

S C Mishra

was former Director- General of Income-tax and author of Transfer Pricing Manual and Transfer Pricing in India: From Inception to BEPS. His areas of specialisation include tax policy, capacity building and training. He had wide experience in legislative drafting and amendment of direct tax laws. He participated in programmes on training methods, tax treaties and comparative tax laws in India and overseas. He also conducted training programmes on taxation of non-residents. He was involved in designing training programmes for officers of developing countries. As a tax administrator, he investigated cases of tax frauds including cross- border transactions. However, the role that he cherished the most was as a training administrator where his job included identification of training needs, designing course profiles and evaluation of these programmes. He was deeply interested in English literature and literature of Indian languages. He loved going for long walks and listening to Hindustani classical music. He breathed his last on 14th August 2024, while working on this book.

SP Singh (SP)

is presently Senior Advisor to the Institute of Chartered Accountants of India (ICAI). He started his career in 1976 as a lecturer of Physics in St. Xavier's College. Ranchi. In 1979 he joined the Indian Revenue Service where he served for over two decades in various capacities. While in the Foreign Tax & Tax Research Division he was part of the team for negotiating and finalising several tax treaties. He was a member of the Expert Group on Transfer Pricing constituted by the Ministry of Finance for drafting the transfer pricing regulations. Later, SP joined Deloitte India as Senior Director where he led several initiatives. SP has been recognized amongst World Leading Transfer Pricing Advisers as well as one of the global leaders in tax litigation for several years by international organisations. SP has an MSc in Fiscal Studies from Bath University, UK, and earned a Master's in Physics in India. He has co-authored several books and regularly writes for taxation journals. His passion is wildlife and nature photography and running where he has participated in several half-marathon races.

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