Tainted Element Test

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....rties dealing at arm's length. As there are specific transfer pricing regulations (SAAR) applicable to international transactions and certain specified domestic transactions, this tainted element is to be examined only in those transactions which are not covered by TP regulations and where the main purpose of the arrangement is to obtain tax benefit. As current transfer pricing regulations are applicable to international transactions and some specified domestic transactions, a mechanism needs to be provided for the Assessing Officer (AO) to ascertain whether rights, or obligations, created in an arrangement are the same as ordinarily created between persons dealing at arm's length. He should be able to seek expert opinion in this regard....

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....gth price of each part of the contract determined as per transfer pricing regulations under the Act. However, it is clarified that GAAR provisions in such cases may be invoked only where there is an overall benefit in reallocation of prices to different parts of the overall contract. For instance, where import duty is levied on offshore supplies, it may not result in any net gain on reallocation of prices; or where offshore designs are not taxable as per the relevant DTAA. Second Tainted Element Refers to an arrangement which results in misuse or abuse of the provisions of the tax law. It implies cases where the law is followed in letter or form but not in spirit or substance, or where the arrangement results in consequences which are....