The tax department today signed a unilateral rollback Advance Pricing Agreement (APA) with an Indian arm of a US-based IT company, bringing certainty to tax liability of the firm for nine years.
"On August 3, 2015, the Central Board of Direct Taxes (CBDT) signed a unilateral APA with a USA multinational company. This APA is for nine years under the newly launched rollback scheme.
"With the conclusion of this APA, it will become clear to multinational companies in India that they can achieve certainty around transfer pricing for a nine-year period," said S P Singh, Senior Director, Deloitte in India.
APAs provide tax certainty and improve investment climate in the country and this one will give a boost to the Indian economy, he said.
APA, introduced in 2012, is a mechanism that aims at curtailing disputes that may arise from transfer pricing issues between MNCs and the revenue department.
"With this agreement, we will see many international companies adopting the APA route to reduce litigation," Singh added.
The agreement between the taxpayer and the tax administration is within a period of four months of the introduction of the rollback scheme in March, 2015, and "in our understanding, is the first one of its kind", he said.
In his budget speech in July 2014, Finance Minister Arun Jaitley had announced the introduction of rollback provision in the APA scheme so that such an agreement entered into for future transactions may also be applied to international transactions undertaken in previous four years.
