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India Signs 5 Advance Pricing Agreements

applications with the tax department in fiscal 2013-2014.
 
 
The Revenue authorities' approach in the APA program has been very pragmatic. However, it remains to be seen how successfully India can close bilateral APAs, considering that Revenue's positions on various issues have been heatedly opposed in other countries.
 
 
 
The CBDT has received APA applications related to the following:
 
Intangibles: Intangibles have been a major source of litigation in the past, particularly regarding factors such as the legal versus economic ownership transfer or right to use intangibles, and advertising, marketing, and promotion expenditure.
 
 
Profit sharing agreements: When an Indian taxpayer is a party to a profit-sharing agreement, the determination of the arm's-length compensation becomes complex. An APA would be particularly helpful for taxpayers in the banking, insurance, and logistics industries, which generally resort to profit-split compensation because of their closely integrated operation models.
 
Royalties and other payments for intragroup services: This is another area of dispute in India because of the perceived lack of benefits derived from such payments. Because there is often not enough comparable data, the justification of the amount of payments or the tax rate applied to royalties and other payments for intragroup services has always been a source of controversy. Taxpayers often are asked to demonstrate their need for the services and the necessity of obtaining the services from associated enterprises, and to prove that the services are not shareholders activities.