• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/18/2014

India - Transfer pricing referral is time-barred 

July 18: The Bangalore Bench of the Income-tax Appellate Tribunal issued an order quashing proceedings for assessment that were already completed and when subsequent events failed to reveal incriminating evidence relating to transfer pricing. Himalaya Drug Co. v. DCIT (ITA Nos. 1634 to 1639/Bang/2012)


The taxpayer was engaged in the manufacture and sales of herbal pharmaceutical and health care products.

During assessment proceedings for the AY 2009-10, the Assessing Officer did not make a transfer pricing referral of the taxpayer’s international transactions for a determination of the arm’s length price. Rather, certain expenses were disallowed, and certain additions were made.

In the meantime, the police seized a large amount of cash from the residence of a company director. Following this, the tax authorities initiated proceedings relating to “undisclosed” income, and a reference was made to the Transfer Pricing Officer for a determination of the arm’s length price of the taxpayer’s international transactions.

The Transfer Pricing Officer proposed transfer pricing adjustments, and after this, the Transfer Pricing Officer was directed by the Dispute Resolution Panel (DRP) to make additional transfer pricing adjustments.

The taxpayer initiated an action before the tribunal contenting, in part, that the transfer pricing adjustments were time-barred because: (1) the DRP had failed to issue directions within nine months from the end of the month when the draft assessment order was served on the taxpayer; and (2) the reference to the Transfer Pricing Officer was not valid.

The tribunal concluded that the assessment order for years that had obtained “finality” was barred by the time limitations.

Read a July 2014 report(PDF 456KB) prepared by the KPMG member firm in India: Reopening completed assessments under Section 153C of the Income-tax Act and making reference to transfer pricing is invalid when no incriminating material found during search

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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