Transfer Pricing Compliance in India: Common Mistakes and Key Insights

Transfer Pricing (TP) compliance is a significant source of tax litigation worldwide, with India being no exception. The complexities of TP laws, coupled with evolving judicial interpretations, create an environment where even minor compliance errors can lead to substantial tax adjustments and prolonged disputes. This article explores common mistakes businesses make in TP compliance, highlights critical case laws, and offers actionable insights to avoid these pitfalls.

HC holds State tax authority cannot transfer GST proceedings once initiated on a particular issue to DGGI

 This Tax Alert summarizes a recent ruling of the Punjab and Haryana High Court (HC)  on validity of transfer of proceedings under the Goods and Services Tax (GST) law.

The key observations of the HC are:

Indirect Tax Case Laws - Sep 24.

 ·       Hon’ble SC recently reiterated that the doctrine of promissory estoppel does not apply to the exercise of legislative powers by the Stat 

 

Direct Tax Case Laws - Sep 24.

 SC

·       Supreme Court Upholds Vodafone Idea’s Non-Liability for TDS on Payments to Non-Resident Telecom Operators 

Understanding the Nuances of Section 43CA

 1.      Applicability: Section 43CA specifically applies to land or buildings held as stock-in-trade (i.e., by builders). It seeks to address undervaluation in property transactions by relying on the SVA-assessed value, which is the basis for calculating stamp duty according to state government rules.

CBIC issues clarifications pursuant to recommendations made in the 54th GST Council meeting

 This Tax Alert summarizes recent Circulars^[1] issued by Central Board of Indirect Taxes and Customs pursuant to the recommendations made in the 54th Goods and Services Tax (GST) Council meeting.

CBIC Circulars 230 to 233 dated September 10, 2024 issuing various clarifications

 Pursuant to the 54^th GST Council meeting held on 9 September 2024, CBIC has issued clarificatory circulars on various issues.  We have prepared a summary of the circulars below for your ready reference.

A Shift in Tax Law: GST Circular Highlights Intent-Based Interpretation

 In the realm of tax law, the conventional method of interpreting legal provisions is a literal reading, where the words of the statute are taken at face value to ensure clarity and predictability. However, a recent GST circular introduces a subtle yet significant shift in approach, offering an interpretation based not just on the text, but on the underlying intent of the law. This circular brings into focus the availability of Input Tax Credit (ITC) for demo vehicles—a decision driven by the purpose of the law rather than a strict literal interpretation.

TDS Section 194IA payment on transfer of immovable property

Introduction:

Any sum paid by way of consideration for transfer of any immovable property (other than agricultural land) is covered under section 194-IA, provided the consideration for transfer of an immovable property is not less than Rs. 50 lakhs.

GST Council recommendation in the 54th Meeting

 Hereinbelow the relevant announcements made in the meeting for your reference.  Kindly note that the below proposals/ recommendations shall be given effect by way of issuance of relevant notifications, circulars and/or amendments in the GST law, which will be issued in due course of time.

Higher rate of TDS in the case of Sec 206AA and 206AB:

Sec 206AA:

1. Section 206AA provides that where any person is entitled to receive any income on which tax is deductible at source, he is required to furnish his PAN to the deductor. In case the PAN is not furnished, the tax shall be deducted at a higher rate under section 206AA.

2. If the recipient fails to furnish his PAN to the deductor then tax shall be deducted at the highest of the following rates:
(a) At the rate specified in the relevant provision of the Income-tax Act.
(b) At the rate or rates in force; or
(c) At the rate of 20%

Introduction of Invoice Management System (IMS)

This is to inform you about the advisory issued by GSTN regarding the launch of a new ‘Invoice Management System (IMS)’ on the GST portal, effective from October 1, 2024. This system aims to assist taxpayers in reconciling their purchase records (invoices, credit/debit notes) with the documents issued by their suppliers, helping in the formulation of GSTR 2B and the claim of Input Tax Credit (ITC)

EUROPEAN UNION AI ACT

 

The Artificial Intelligence Act (AI Act) is a European Union regulation concerning artificial intelligence (AI). It establishes a common regulatory and legal framework for AI within the European Union (EU).

GST Reporting Changes from September 1, 2024

This is to update you that w.e.f. September 1, 2024, following changes are taking place in GST return filing process:

 

Tax Due Date - September 2024.

 

S. No	Due Date	Related to	Compliance to be made
1	11.09.2024	GST	Filing of GSTR-1 for August 2024.

Would bonafide mistake of non disclosure of foreign assets in ITR, result into penalty under Black Money Law?

1. What is undisclosed foreign asset?

Section 2(11) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act [‘The Black Money Act’] defines an undisclosed foreign asset as an asset located outside India, for which the assessee has no explanation for or the explanation so provided is unsatisfactory in the Assessing Officer’s Opinion.
The disclosure of foreign assets in Schedule FA (Foreign Assets) is an integral part of the Income Tax Return Forms (ITR) starting from the assessment year 2012-13.

Political contributions U/S 80GGC:

Introduction:
1. Section 80GGC of the Income Tax Act provides an opportunity for the taxpayers to claim deductions on contributions made to political parties.

Contract Boundary under Ind AS 117

Contract boundary under Ind AS 117 defines the scope of a contract for accounting purposes. It determines which cash flows should be included in the measurement of the contract's financial performance.

Transfer of Benami property to a third person

Meaning of Benami Transaction:

The following situations/ transcations fall under the definition of Benami transactions as per the provisions of Prohibition of Benami Property Transactions Act, 1988 (PBPT Act):

1. Where a property is transferred to or is held by a person, and the consideration for such property has been provided, or paid by, another person

2. Where a property related transaction is carried out under a fictitious name.

3. Where the owner of the property has no knowledge / denies having any knowledge of the ownership of such property.

4. Where the person providing the consideration is untraceable or fictitious – the identity of the beneficial owner may also be unknown.

Some definitions:
1. Benamidar means a person in whose name the benami property is held. Benamidar is only an alias for the actual owner, the ‘Beneficial Owner’.

2. A Beneficial owner means a person, whether his identity is known or not, for whose benefit the benami property is held by a Benamidar.

3. Property means assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal.

Some pertinent queries on transfer of Benami Property:
1. Can a Benamidar re-transfer the Benami property to the beneficial owner or any other person?
Ans: No. Re-transfer of the Benami property by the Benamidar to the beneficial owner or any other person acting on his behalf is prohibited, and such a re-transfer is deemed to be null and void.

2. Can a Benamidar sell away Benami property to avoid confiscation?
Ans: Section 27(2) of the PBPT Act protects the interests of a genuine purchaser/holder of property by providing that Adjudi­cating Authority shall not confiscate property adjudicated to be benami property if such property was held or acquired by a person from the Benamidar for adequate consideration prior to the issue of notice by Initiating Officer and without his having knowledge of the Benami transaction.

However, Section 57 of the PBPT Act provides that where, after the issue of a notice under Section 24, any property referred to in the said notice is transferred by any mode whatsoever, such transfer shall, for the purposes of the proceedings under this Act, be ignored. If such property is subsequently confiscated by the Central Government then the transfer of such property shall be deemed to be null and void

Income Tax Clearance Certificate (ITCC) not for everyone

  

 

Since 2004 there is a provision in the Income-tax Act, 1961 which provides for obtaining an income tax clearance certificate (ITCC) under Section 230 of Income-tax Act, 1961 (‘IT Act’). It prescribes that a person domiciled in India who plans to leave India shall at the time of departure declare in prescribed form and manner (Form 30C) following details to the prescribed income tax authority: