Which pricing disputes

In principle, the rule set by art. Despite the matter at hand is governed by widespread principles also at an international level , the definition of an arm's length price for intercompany transactions of goods and services raises concern which does not appear to be a matter of proof nonetheless a matter to be solved in the light of the general rule of the burden of proof. To the contrary, the transfer pricing dispute seems to function on a completely different level compared to proof. In this regard, as a preliminary remark, one should consider that transfer pricing, unlike price agreed, does not reflect historical facts.

Whilst, transfer pricing is the result of an evaluation or, better, the result of a methodological choice and its correct application. In fact, when discussing about transfer pricing, the dispute revolves around two questions: 1 what's the correct method to the case? These questions are clearly different from those characterizing the probative matter under which one does not ask whether a given claim by a party is correct but whether it is true.

There is a clear departure from the basic rules if one just considers that the so-called "judgment of correctness" is a judgment that always requires an element of comparison, of a tertium comparationis , an element that is not conceivable in situations where probative matter exists. Some examples can give clearer idea.

Wondering if a certain transaction is priced in compliance with arm's length principle fully diverges from asking questions such as "it's raining today", "someone shot at someone" or "company X bought a good for which he paid an amount equal to Z".

Therefore, when a tax system disqualifies the price agreed between the parties in inter-company transactions in favor of a different and hypothetical price, also that tax system deliberately departs from a "world of facts" to enter a "world of hypothesis". This world of facts neither can be assessed under terms of "truth" or "falsity" nor, therefore, under probative terms but rather under merely evaluative terms. By just excluding factual elements pertaining transfer pricing process e. By denying factual nature to transfer pricing and by excluding transfer pricing from evidences bring very important consequences from the point of view of the application of both the tax assessment and tax litigation procedures.

Cos file separate transfer pricing positions with customs and I-T depts, could gain from information arbitrage. The special valuation branch of the customs department is scrutinising transfer pricing methodologies of several multinationals. Assessing officers should be encouraged to file quality appeals which would improve the rate of success.

Proving that an expense has been incurred wholly and exclusively for the purpose of business has been a matter of dispute for long between taxpayers and tax authorities.

Multinationals from two important trade partners, France and Germany, would be the immediate beneficiaries of move. Tax officers can question and demand tax in case they suspect that companies are escaping taxes, which will make matters worse for them.

Secondary adjustments may take the form of "constructive dividends, constructive equity contributions, or constructive loans", said the memorandum to the Finance Bill This takes the total number of bilateral APAs signed to three. The resolution of such issues, CBDT said further, follows the framework agreement signed with US revenue authorities in January last year. The CBDT, which has been on a fast track to solve the transfer pricing disputes, has recently signed yet another advance pricing agreement APA with an animation services company.

The ruling will have a bearing on many current transfer pricing disputes and may prompt companies to ask for the quashing of tax demands. The government has issued the final rules to incorporate range concept and use of multi-year data in transfer pricing calculations to reduce litigation.

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