THE Central Board of Direct Taxes (CBDT), Chairman, Mr Sushil Chandra, has released the first Annul Report on the Advance Pricing Agreement (APA) Programme in India. The Advance Pricing Agreement (APA) programme in India was launched in 2012 vide the Finance Act, 2012 through the insertion of Sections 92CC and 92CD in the Income-tax Act, 1961. These statutory provisions, effective from July 1, 2012, lent the legal backing to the CBDT to enter into Advance Pricing Agreements (APAs) with taxpayers for a maximum period of 5 years in respect of international transactions between Associated Enterprises (AEs) to determine the Arm’s Length Price (ALP) or to specify the manner in which the ALP is to be determined.

Under the APA programme, APAs can be multilateral or bilateral (involving CBDT and the tax authorities of one or more countries) or unilateral (involving the CBDT only). Over the last 5 years, more than 800 applications have been filed in India. Majority of these applications (about 85%) are for unilateral APAs between the Indian taxpayer and the CBDT. Till March 31, 2017, 152 agreements have been entered into (141 unilateral and 11 bilateral).

The APA applications are processed and analysed by dedicated APA teams working under the overall supervision of Pr. CCIT (International Taxation & Transfer Pricing). Each APA team is headed by a Commissioner of Income Tax and the team also comprises Addl./Joint Commissioners of Income-tax and Deputy/Asst. Commissioners of Income-tax. Presently, there are two APA teams and the APA offices are located at Delhi, Mumbai and Bengaluru.

In 2016-17, 88 APAs were concluded, which is probably the highest number of APAs entered into by any jurisdiction world-wide in the same period. It makes for an interesting comparison that while India has concluded 152 APAs in 4 years, China has entered into 113 APAs in the ten years between 2005 and 2014.

Out of the total unilateral Agreements entered into almost 50% (70 out of 141) are with the Information Technology and Banking/Finance industries.

The Indian APA programme has matured over the past five years and the number of agreements getting signed is testimony to that. Complex transfer pricing issues, which were prone to long drawn litigation, are being increasingly resolved through APAs. The resolutions have been to the satisfaction of both taxpayers and the Government.

(See Annual Report (2016-17)