Advance Pricing Agreement Scheme

Advance Pricing Agreement Scheme

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Income Tax
Roll back provision in Advance Pricing Agreement Scheme [Section 92CC]

Roll back provision in Advance Pricing Agreement Scheme [Section 92CC] [W.e.f. 1-10-2014]

Section 92CC provides for Advance Pricing Agreement (APA). It empowers the Central Board of Direct Taxes, with the approval of the Central Government, to enter into an APA with any person for determining the Arm's Length Price (ALP) or specifying the manner in which ALP is to be determined in relation to an international transaction which is to be entered into by the person. The agreement entered into is valid for a period, not exceeding 5 previous years, as may be mentioned in the agreement. Once the agreement is entered into, the ALP of the international transaction, which is subject matter of the APA, would be determined in accordance with such an APA. In many countries the APA scheme provides for "roll back" mechanism for dealing with ALP issues relating to transactions entered into during the period prior to APA. The "roll back" provisions refers to the applicability of the methodology of determination of ALP, or the ALP, to be applied to the international transactions which had already been entered into in a period prior to the period covered under an APA. However, the "roll back" relief is provided on case to case basis subject to certain conditions. Providing of such a mechanism in Indian legislation would also lead to reduction in large scale litigation which is currently pending or may arise in future in respect of the transfer pricing matters. Therefore, the Act has inserted section 92CC(9A) to provide that the agreement referred to in section 92CC(1) (i.e. APA) may, subject to such conditions, procedure and manner, as may be prescribed provide for determining the arm's length price or specify the manner in which arm's length price shall be determined in relation to an international transaction entered into by the person during any period not exceeding four previous years preceding the first of the previous years referred to in section 92CC(4) and the arm's length price of such international transaction shall be determined in accordance with the said agreement. BACK 


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