International transfer pricing
This query is : Resolved
15 November 2017
Facts:
One of our client a Private Limited Company have accepted Share application Money from its subsidiary a Foreign Co.& also issued shares in the same financial year ie FY 16 - 17.The shares issued were valued by DCF Method. Query:
1) Wether International Transfer Pricing Provisions will be applicable to the Co. & 3CEB needs to be filed before 30th Nov. 2017.
2) If Transfer Pricing Provisions applicable, what will be the method of Computing Arms Length price.
One of our client a Private Limited Company have accepted Share application Money from its subsidiary a Foreign Co.& also issued shares in the same financial year ie FY 16 - 17.The shares issued were valued by DCF Method. Query:
1) Wether International Transfer Pricing Provisions will be applicable to the Co. & 3CEB needs to be filed before 30th Nov. 2017.
2) If Transfer Pricing Provisions applicable, what will be the method of Computing Arms Length price.
15 November 2017
Transfer pricing provisions are not applicable for share application money. Once its not applicable, filing form 3CEB & method of computation of arm length price is also not applicable.
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15 November 2017
Was going through Applicability Provisions in Guidance note issued by ICA, abstact is produced below for your reference
1.15 International transaction covers transaction in the nature of purchase,
sale or lease of tangible or intangible property or provision of services or
lending or borrowing money or any other transaction having a bearing on the
profits and income, losses or assets of such enterprises and includes a
mutual agreement or arrangement between two or more AEs for the
allocation or apportionment of, or any contribution to, any cost or expense
incurred or to be incurred in connection with a benefit, service or facility
provided or to be provided to any one or more of such enterprises. Further,
the expression ‘international transaction’ has been clarified vide Finance Act
2012 with retrospective effect from 1 April 2002 to include a wide variety of
arrangements.
Will it not be covered in above arrangement, If you can provide me with a clarification note or a case law, that will be of great help.
1.15 International transaction covers transaction in the nature of purchase,
sale or lease of tangible or intangible property or provision of services or
lending or borrowing money or any other transaction having a bearing on the
profits and income, losses or assets of such enterprises and includes a
mutual agreement or arrangement between two or more AEs for the
allocation or apportionment of, or any contribution to, any cost or expense
incurred or to be incurred in connection with a benefit, service or facility
provided or to be provided to any one or more of such enterprises. Further,
the expression ‘international transaction’ has been clarified vide Finance Act
2012 with retrospective effect from 1 April 2002 to include a wide variety of
arrangements.
Will it not be covered in above arrangement, If you can provide me with a clarification note or a case law, that will be of great help.
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15 November 2017
As you mentioned above, international transaction covers which has impact on revenue/ expenditure account. Share application money is in the nature of capital and it does not fall in the above category.
1. Issue of shares by an Indian entity to its non-resident AEs, no income arises; hence TP provisions are not applicable. Held in Shell India Markets (p) Ltd vs. union of india [2015]
2. Where assessee company has paid share application money to its AE, but delay occurred in issuance of share certificates, that does not mean that up to date of allotment, said transaction could be treated as international transactions of loans given by assessee to its AE - Held in Parle Biscuits (p) Ltd Vs Deputy Commission of Income Tax [2014] and
Much more case law is there.
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1. Issue of shares by an Indian entity to its non-resident AEs, no income arises; hence TP provisions are not applicable. Held in Shell India Markets (p) Ltd vs. union of india [2015]
2. Where assessee company has paid share application money to its AE, but delay occurred in issuance of share certificates, that does not mean that up to date of allotment, said transaction could be treated as international transactions of loans given by assessee to its AE - Held in Parle Biscuits (p) Ltd Vs Deputy Commission of Income Tax [2014] and
Much more case law is there.
Follow me on twitter @CAysilkarunai for more interactions!
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