New Delhi: The tax department on Monday signed seven more unilateral advance pricing agreements (APAs) with taxpayers as it aims to reduce litigation by providing certainty in the domain of transfer pricing.
"The 7 APAs signed today pertain to various sectors of the economy like banking, information technology and automotives," a Finance Ministry statement said on Monday.
The international transactions covered in these agreements include software development services, IT-enabled services (BPOs), engineering design services, and administrative and business support services.
An advance pricing agreement (APA), introduced in the Income Tax Act in 2012, is a pact between a taxpayer and the tax department on a transfer pricing procedure for determining the value of assets and ensuing taxes on intra-group overseas transactions.
APAs could be a unilateral agreement between the company and Indian tax authorities or a bilateral agreement involving a foreign country.
Till date, the Central Board of Direct Taxes (CBDT) has entered into 77 APAs. These includes three bilateral APAs and 74 unilateral APAs. In the current financial year, a total of 13 unilateral APAs have been entered into so far.
"The progress of the APA Scheme strengthens the government's mission of fostering a non-adversarial tax regime. The CBDT expects more APAs to be concluded and signed in the near future," the statement added.
The APA endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.
Since its inception, the APA scheme has attracted tremendous interest and that has resulted in more than 700 applications (both unilateral and bilateral) having been filed in just four years, the statement added.