CII Communique July 2011

corporate indiataxationTax Issues in Cross Border Transactions:M&A and Transfer PricingWith most globalMNCs and big Indiancompanies operatingacross continents,many of the M&Adeals require efficients t r u c t u r i n g a n dknowledge of thecomplex regulatoryenvironment prevailingin different countries.The conference on‘Tax Issues in CrossBorder Transactions:M&A and TransferPricing’ on 2 Junein Mumbai examinedthe multiple tax issuesfaced in the domainof M&A and transferpricing. It is an areawhich requires specialattention, especially inthe backdrop of effortsto curb black moneyoutflow.P. P. Srivastava, Chief Commissioner of Income Tax, Mumbai; S. Mahalingam,CFO, Tata Consultancy Services, and R. N. Dash, Director General,International Taxation, Union Ministry of FinanceMr. S. Mahalingam, Chairman, CII National SkillDevelopment Council, and CFO, Tata ConsultancyServices, urged the Income Tax Department to introduceAdvance Pricing Arrangements and Safe HarbourProvisions so that transfer pricing litigations andcontentious adjustments to the tune of over Rs 20,000crores are reduced. He also expressed concern overthe General Anti Avoidance Rules (GAAR) in the DirectTax Code, which could again lead to a lot of litigation,and emphasized that corporate tax payers were lookingfor certainty.It is the responsibility of the transfer pricing departmentto protect India’s tax base and prevent any shiftingof profits outside India, observed Mr. R. N. Dash,Director General, International Taxation, Union Ministryof Finance. He assured that the power of surveygiven to transfer pricingofficers would be usedcautiously by the taxdepartment, and theincome tax departmentwould adopt internationalbest practices. The roleof the administrationshould be transparent,with continuousengagement with taxpayers, to ensure thatstrict action is takenagainst those indulgingin malpractices, heobserved.Mr. Dash said thatin order to curb themenace of black money,the Government is in theprocess of establishingtreaty protocols withsome of the tax havens,and the conditionsare being revived toexchange tax information. Having already establishedtreaties with Singapore and Mauritius, the governmentis in the process of concluding such pacts with eightother countries, he said.Mr. P. P. Srivastava, Chief Commissioner of Income Tax,Mumbai, advised corporate and tax professionals to becareful while preparing financial statements. AdvisingChartered Accountants to ensure that the accountsof companies are not fudged, Mr. Srivastava admittedthat many issues related to international taxes are yetto be settled.Pointing out that as much as 70 per cent of the world’stransfer pricing litigations emanate from India, Mr. KetanDalal, Executive Director, Tax & Regulatory Services,PricewaterhouseCoopers, expressed concern over themagnitude of tax issues in India relating to cross bordertransactions.28 | July 2011 Communiqué