TaxTMI 
TaxTMI 
Guidelines for Implementation of Transfer Pricing Provisions - Replacement of Instruction No. 15/2015
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....two or more associated enterprises shall be computed having regard to the Arm's Length Price. Instruction No. 3 was issued on 20th May, 2003 to provide guidance to the Transfer Pricing Officers (TPOs) and the Assessing Officers (AOs) to operationalise the transfer pricing provisions and to have procedural uniformity. Due to a number of legislative, procedural and structural changes carried out over the last few years, Instruction No. 3 of 2003 was replaced with Instruction No. 15/2015, dated 16th October, 2015. After the issuance of Instruction No. 15/2015, the Board has received some suggestions and queries, which have been examined in detail. Accordingly, this Instruction is being issued to replace Instruction No. 15 of 2015. This Instruction is applicable for both international transactions and specified domestic transactions between associated enterprises. The guidelines on various issues are as follows: 3. Reference to Transfer Pricing Officer (TPO) 3.1 The power to determine the Arm's Length Price (ALP) in an international transaction or specif....
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....s been upheld by the judicial authorities or is pending in appeal; and (c) where search and seizure or survey operations have been carried out under the provisions of the Income-tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have been recorded by the Investigation Wing or the AO. 3.4 For cases to be referred by the AO to the TPO in accordance with paragraphs 3.2 and 3.3 above, in respect of transactions having the following situations, the AO must, as a jurisdictional requirement, record his satisfaction that there is an income or a potential of an income arising and/or being affected on determination of the ALP of an international transaction or specified domestic transaction before seeking approval of the PCIT or CIT to refer the matter to the TPO for determination of the ALP: • where the taxpayer has not filed the Accountant's report under Section 92E of the Act but the international transactions or specified domestic transactions undertaken by it come to the notice of the AO; • where the taxpayer ha....
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....lowed: (a) If a case has been selected for scrutiny on a TP risk parameter pertaining to international transactions only, then the international transactions shall alone be referred to the TPO; (b) If a case has been selected for scrutiny on a TP risk parameter pertaining to specified domestic transactions only, then the specified domestic transactions shall alone be referred to the TPO; and (c) If a case has been selected for scrutiny on the basis of TP risk parameters pertaining to both international transactions and specified domestic transactions, then the international transactions and the specified domestic transactions shall together be referred to the TPO. Since international transactions may be benchmarked together at the entity level due to the inter-linkages amongst them, if a case has been selected for scrutiny on a TP risk parameter pertaining to one or more international transactions, then all the international transactions entered into by the taxpayer - except those about which the AO has decided not to make a reference as per paragraph 3.4 shall be referred to....
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....ecessary that the order of the TPO contains adequate reasons on all these counts. Copies of the documents or the relevant data used in arriving at the arm's length price should be made available to the AO for his records and the use at subsequent stages of appellate or penal proceedings. 4.3 The TPO, being an Additional/Joint CIT, shall obtain the approval of the jurisdictional CIT (Transfer Pricing) before passing the order. On the other hand, the TPO, being a Deputy/Assistant CIT, shall obtain the approval of the jurisdictional Additional/Joint CIT before passing the order. The jurisdictional CIT (TP) should assign a limited number of important and complex cases, not exceeding 50, to the Additional/Joint CsIT (TPOs) working in the same jurisdiction. For the selection of such important and complex cases by the CsIT (TP), the concerned CCsIT (International Taxation) shall frame appropriate guidelines. 4.4 In addition to the above, the TPO is required to carry out the Compliance Audit of the Advance Pricing Agreements (APAs) entered into by the Board and the taxpayers in accorda....
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.... which it pertains Name and Designation of the AO making the Reference Name, PAN and Address of the Taxpayer Nature of Business of the Taxpayer Description of International Transaction as per section 92B and Value of such Transaction Received by the Taxpayer Description of International Transaction as per section 92B and Value of such Transaction Paid by the Taxpayer Name and Address of the Associated Enterprise 9 10 11 12 13 14 15 16 Nature of Association in terms of section 92A Date of Issue of First Notice to Taxpayer Transfer Price as Computed by the Taxpayer Transfer Pricing Method Applied by the Taxpayer Arm's Length Price as Determined by the TPO under section 92CA (3) Transfer Pricing Method Applied by the TPO Date of Order under section 92CA(3) Date of Dispatch of the Order to the AO ANNEXURE-II Register of Record to be Maintained by the Transfer Pricing Officer (TPO) for Specified Domestic Transactions: 1 2 3 4 5 ....