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PRESENTATION

on

DOING BUSINESS
IN INDIA

Registered office:
SCO 35, Second Floor, Sector -26, Chandigarh
160 019
Tel- 91-172-2790366, 2790075, Fax-91-1722790260, Mobile-09814011278
Email: raman@ramanaggarwal.com

WELCOME

ABOUT ARA

ARA is a firm of chartered accountants.

ARA firm was formed in the 1988 (22 years).

ARA firm provide Services in the area of Audit, Tax (Direct, indirect) and
Advisory.

ARA team is comprised of more than 25 multi displined professionals such


as Chartered Accountants, Company Secretary, Lawyers, Cost Accountants
and MBAs.

ARA have state of the art facility in Chandigarh, New Delhi & Pune.

ARA have more then 100 Corporate Clients and leading MNCs (for USA, UK,
Japan, Middle East, Europe).

Mr. Raman Aggarwal, the CEO & Founder empanelled with the Office of
Official Liquidator attached with the High Court of Punjab, Haryana and
Chandigarh. An Auditor for conducting Special Audits approved by the Tax
Authorities.

Nominated to the Regional Direct Taxes Advisory Council.

Member of The Institute of Internal Auditors, Inc., Florida, USA,


International Fiscal Association Netherlands and PHD Chambers of
Commerce & Industry, Confederation of Indian Industry.

SERVICES & SOLUTIONS


AUDIT AND ASSURANCE
TAX & REGULATORY SERVICES
SPECIALITY SERVICES

Setting up New Business


Incorporation of a Limited Company
Setting up of STPI Unit and Maintenance
Setting up of SEZ UNIT and Maintenance
Doing Business in India
Doing Business Outside India
Setting up Offshore Companies
International Executive Services
Business Registrations
Intellectual Property
Payroll Services
Corporate Secretarial Services
Virtual Office Services
KPO-Accounts and Tax Outsource Services

INTERNATINOL TAXATION
FINANCIAL ADVISORY SERVICES
LEGAL SERVICES
OUTSOURCING SERVICES

TEAM
S.NO

NAME

QUALIFICATION

EXPERIENCE

Mr. Raman Aggarwal

Fellow Chartered
Accountant

25 Years in Accounts, Finance,


Tax, Legal, Management etc.

Mrs. Simpy Gupta

Bachelor in Law. &


Company Secretary

15 Years in Legal & Corporate


affairs

Mr. Sameer Sawrup

Fellow Chartered
Accountant

16 Years in Accounts, Finance,


Tax, Legal, Management etc

Mr. Unni Krishnan

Graduate

18 Years experience in Corporate


Affairs

Ms. Arti

Post Graduate

9 years experience in Regulatory


Compliances

Mr. Sanjay Aggarwal

Chartered Accountant

18 Years Accounts, Finance & Tax

Mr. Suman

Master in Commerce

14 Years in Accounts, Finance,


Tax, Legal, Management etc

Mr. Vineet Thakral

Master in Law &


Management

2 Years Tax and Regulatory

Ms. Manmeet Kaur

Masters in Law

3 Years Legal

10

Mr. Nikhil Vats

Bachelor in Law

2 Years Legal

11

Ms. Neelam

Bachelor in Law

3 Years Legal

12

Ms. Moonu Rana

Bachelor in Law

2 Years Legal

More than 15 other Professionally Qualified Support Staff

DOING BUSINESS IN
INDIA

FOREIGN DIRECT INVESTMENT IN


INDIA

AUTOMATIC ROUTE
APPROVAL ROUTE

ENTRY STRATEGY

JOINT VENTURE
WHOLLY OWNED SUBSIDIARY
BRANCH OFFICE
AGENCY

FORMS OF ENTERPRISES IN INDIA


INCORPORATED ENTITY
Private Limited Company
Public Limited Company

UNINCORPORATED ENTITIES
Branch Office
Liaison Office
Project Office
Partnership
Trust

TYPE OF SECURITIES

Equity Share
Preference Share
Debenture

LAWS GOVERNING BUSINESS IN


INDIA
The Companies Act. 1956
Arbitration Reconciliation Act, 1996
The Competition Act, 2002
The Foreign Exchange Management Act, 1999
Income Tax Act, 1961
Central Sales Tax, 1956
Central Excise Act, 1944
Information Technology Act, 2000
Copyright Act, 1957
Geographical Indications of Goods Act, 1999
Indian Patents Act, 1970
Designs Act, 2000
Industrial Disputes Act, 1947
Workmen Compensation Act, 1956
Employees Provident Fund Miscellaneous Provisions Act,
1952
Consumer Protection Act, 1956

IMPORTANT REGULATORY
AUTHORITIES FOR FOREIGN
INVESTMENT
Secretariat for Industrial Assistance (SIA)
Foreign Investment Promotion Board (FIPB)
The Foreign Investment Implementation Authority (FIIA)
Reserve Bank of India (RBI)
Registrar of Companies (RoC)
Securities and Exchange Board of India (SEBI)
Central Board of Excise and Customs (CBEC)
Central Board of Direct Taxes (CBDT)
Authority for Advance Rulings (AAR)
Investment Commission

DIRECT TAXES

INCOME TAX
DIVIDEND DISTRIBUTION TAX

INDIRECT TAX
Customs duty
CENVAT (excise duty)
Central Sales tax
Value added tax
Service tax
Octroi duty/entry tax
Stamp Duty
R&D cess
Works contract tax
Turnover tax
Purchase tax
Secondary and higher education cess

INTERNATIONAL TAX TREATIES

Treaties with favorable jurisdictions such as Mauritius,


Cyprus, Singapore and the Netherlands
India has entered double tax treaty with 79 Countries

IMPORTANT HR STATUTES
TRAINING, RECRUITMENT AND SCREENING
Employment exchanges (Compulsory notification of
vacancies) act, 1959
The payment of gratuity act, 1972
The apprentices act, 1961
Contract labour (regulation and abolition) act, 1970
Child labour (prohibition and regulation) act, 1986
PAY, SALARY AND BONUS
Minimum wages act, 1948
Payment of wages act, 1936
Equal remuneration act, 1976
Payment of bonus act, 1965
COND Next Slide

EMPLOYMET TERMS, CONDITIONS AND BENEFITS


Factories act, 1948
Shops and commercial establishments acts
Industrial employment (Standing orders) act, 1946
Maternity benefit act, 1961
SOCIAL SECURITY, INSURANCE AND COMPENSATION
Employees provident funds and miscellaneous act, 1952
(epf act)
Employees state insurance act, 1948 (esi act)
Workmens compensation act, 1923
Disputes and liabilities
Industrial disputes act, 1947
Employers liability act, 1938

INTELLECTUAL PROPERTY

Patents
Copy Rights
Trade Marks
Trade Secretes
Geographical indication of goods

ACCOUNTS AND AUDIT

Indian Accounting Standards


Audit and Assurance Standards
Guidance notes
Standards on internal audit
Opinion of expert advisory of ICAI
IFRS to be implemented in 2011

REPORTING
REQUIREMENTS

INCOME TAX
Annual Tax Return
Quarterly withholding tax return
Accountant report under of transfer pricing rule
Tax audit report
Accountant report in case of MAT
Accountant report in case of STPI/EOU/SEZ

COMPANY LAW
Filling of annual audited financial statements
Filling of annual return
Filling of documents in case of

Change of Director
Change of Capital
Change of Registered Office
Registration of Charge

EXCHANGE CONTROL LAW/RBI

Intimation to RBI from receipt of capital


Intimation to RBI from the date of allotment of shares
Annual return to RBI

SERVICE TAX LAW

Monthly deposit of tax


Half yearly tax return
Refund of Service Tax within 1 year

STPI

Monthly progress report


Annual return
Filling of Softex form
Reimbursement of CST on half yearly basis

VAT/CST

Monthly/Quarterly return
Annual return

EXTRACTION OF EARNINGS OUT


OF INDIA

Dividend
Buyback
Redemption

EXIT STRATEGY

Dissolution of company
Sale of share
Merger/Amalgamation
IPO

INCOME TAX LAW AT A


GLANCE
IN
INDIA

INCOME TAX AT A GLANCE


CHARGEABILITY
Income arising or accruing or receiving in India including
specified deeming income

TAX RULE
Resident Rule
Source Rule

TAX PAYER TYPE


Residents
Non Residents
Resident but not Ordinarily Resident

COND Next Slide

SCOPE

Worldwide Income Taxable in case of Resident


Indian Sourced Income Taxable in case of Non Resident
Worldwide Income except Business Income Taxable in case of Resident
but not Ordinarily Resident

PERIOD

12 months period from 1st April to 31st March (Accounting Year)


Law as exists in next year applicable (Assessment Year)

CLASSIFICATION AND COMPUTATION OF INCOME

Income is classified as below and then computed according to the


procedure specified for each classification
SALARY
HOUSE PROP0ERTY
BUSINESS/PROFESSION
CAPITAL GAIN
OTHER SOURCES (RESIDUARY)

COND Next Slide

EXEMPTIONS AND DEDUCTIONS

Various specified exemptions and deductions are allowed based on


various incentive schemes

MODE OF TAX PAYMENT

Self Assessment (at the time of filing tax return)


Advance Tax
( 3 to 4 installments on estimated basis)
TDS
(deposited by buyer on behalf)

WITHHOLDING TAXES

Certain specified transactions are subject to withholding taxes

FILING REQUIREMENTS

31st July
(In case of Individual)
30th Sept.
(In case of corporation or non corporation if
turnover exceeds 6 million)
Revised return within 1 year from end of A/Y

COND Next Slide

ASSESSMENT PROCEDURE
Accepted as such (If not selected for audit within six months
from the end of A/Y )
Selected for Scrutiny (Audit)

TIME PERIOD FOR ASSESSMENT


1 year from the end of A/Y if not selected for Audit
2 years from the end of A/Y if selected for Audit

REASSESSMENT PROCEDURE
If income escaped taxation or wrong information by tax payer
within 4/6 years from the end of A/Y

TIME PERIOD FOR REASSESSMENT


9 months from the end of the F/Y in which notice is served

RECTIFICATION OF ORDER
Within 4 years from the end of the F/Y in which order is
passed or 6 months from the end of the month in which
rectification application is received
COND Next Slide

REVISION OF ORDER BY COMMISSIONER


Within 2 years from the end of the F/Y in which order was
passed

REVISION OF ORDER BY COMMISSIONER IF TAX PAYER


REQUESTED
Within 1 year from the end of the F/Y in which order was
passed

REFUND
Tax payer is entitled to refund of excess tax deposited with
interest @ 6% per annum

INTEREST
Interest @ 12% per annum for delay in filing return, deposit of
tax etc.

PENALTIES
Maximum 300% of tax amount

PROSECUTION

Willful attempt to evade tax


Willful failure to file tax return
Willful failure to file documents and accounts
Falsification of books of accounts and documents
False statements
False returns
Willful non compliance

PUNISHMENT
Imprisonment ranges from 6 months to 7 years with fine or
without fine subject to trial in the court

Appellant Authorities
There are 4 level of appellant authorities :1) Commissioner of Income Tax (within Tax dept)
2) Income Tax Appellant Tribunal (Lower Court)
3) High Court
4) Supreme Court of India

WEALTH TAX

IF TAXABLE WEALTH EXCEEDS RS. 3 MILLION


WEALTH TAX @ 1.03%

INCOME TAX TABLE


Domestic Company

33.99%

Foreign Company

42.23%

Dividend distribution tax

16.995%

Capital gains tax on exit or


restructuring

0% to 42.23% (long/short
term)

Withholding Taxes

Nagging problems

Minimum Alternate Tax

Domestic companies: raised


from 11.33% to 16.995%
Foreign companies: raised
from 10.558% to 15.836%

NEW DIRECT TAX CODE


TAXATION OF COMPANIES:

Companies: 25%
Branch profit tax: 15%

GAAR Introduce
Treaty Override Introduced
Short Term/Long Term Capital gains @ 30%
Residence rule for companies: Place of control and
management, wholly or partly in India, at any time in the
year
Wealth tax @ 0.25% (basic exemption USD 10 Millions)

TAX RATE COMPARISION


Corporate Income
Tax Rate

30%

25%

Minimum
Alternative Tax

15% (of book


profits)

2% of gross assets

Capital Gains

0% - 40%

30%

Branch Profit Tax

0%

15%

Dividends

0%(DDT of 15% is
applicable)

0% (DDT of 15% is
applicable)

Interest

10% - 40%

20%

Royalty

10%

20% (on gross


basis)

Service and
Management

10%

20% (on gross


basis)

Withholding Taxes
(payments to nonresidents)

INTERNATIONAL TAXATION
AT A
GLANCE

INTERNATIONAL TAX AT A
GLANCE
All payments in the nature of chargeable income subject to
Withholding Tax.
Withholding Tax rate as stated in either Treaty or Domestic Tax
Law which is more beneficial to tax payer.
Provisions to lower Withholding Tax rate in Indian Tax Law.
Indian Party making payment of income to Non Resident or
Business Connection or Employer treated as Representative
Assesses (Agent).
Income from Permanent
Authoritys Radar.

Establishment

is

always

on

Tax

Underlying Tax Credit available to US Corporations not Individuals.

DOUBLE TAXATION TREATY


BETWEEN INDIA & USA
RATE
DIVIDEND

NIL

INTEREST

10-15%

ROYALTY
10% in case of use of Industrial, Commercial
and Scientific Equipment
15% if payer is Government or Specified
Organization
20% in other Cases
FEE FOR INCLUDED 10% in case of use of Technical or Consulting
SERVICES
Services, Ancillary & Subsidiary to Industrial,
Commercial and Scientific Equipment
15% if payer is Government or Specified
Organization
20% in other Cases

TRANSFER PRICING LAW


IN
INDIA

INTRODUCTION TO TRANSFER
PRICING
In India, Transfer Pricing regulations were introduced from April 1,2001
as a measure to curb tax avoidance.
Any Income arising from an international transaction to be computed
at the arms length price (ALP).
The Central Board of Direct Taxes has set up a separate cell for dealing
with cases of transfer pricing

SOURCE
OECD guidelines
US regulations and jurisprudence
Indian jurisprudence

ARMS LENGTH PRINCIPLE

Where an enterprise enters into transactions with associated


enterprises, in order to determine fair profit of that
enterprise, the price of the transactions should be compared
with those entered into by two independent enterprise under
uncontrolled conditions and under similar circumstances.

APPLICABILITY

INTERNATIONAL TRANSACTIONS
ASSOCIATED ENTERPRISES

INTERNATIONAL TRANSACTIONS
Purchase
Sale
Lease of tangible or intangible property
Provision of services
Lending or borrowing money or
Any other transaction having a bearing on the profits,
income, losses or Assets of such enterprise.

ASSOCIATED ENTERPRISES
PRIMARY ASSOCIATION
Management/Control/Capital

SECONDARY ASSOCIATION
Direct or indirect voting power of at least 26%
Common parent holds voting power of at least 26% in both
Loan of 51% or more of value of assets
Guarantee of 10% or more of total borrowings
One appoints more than half of directions on board or one
executive director of other
Common parent appoints more than half of directors on board or
executive director in both
Whole dependence on use of IPRs of the other
Buying of bulk raw materials, Sales to one party etc.

STEPS FOR DETERMINATION OF


ALP
STEPS INVOLVED IN THE DETERMINATION OF THE ALP:
Identification of the International Transaction
Identification of an Uncontrolled Transaction
Identification and comparison of specific characteristics of the two
transactions (Comparability) as per Rule 10A and 10B. Finding
out whether differences, if any, between the two transactions can
be reconciled/resolved
Ascertaining the most appropriate method
Determination of the arms length price by applying the method
chosen.

METHODS
The specific methods prescribed for computing arms
length price, which are as follows:
TRADITIONAL TRANSACTION METHOD
TRANSACTIONAL PROFIT METHOD

TRADITIONAL TRANSACTION
METHOD
COMPARABLE UNCONTROLLED PRICE METHOD:
Under this method, the first step is to identify the price charged or
paid for property transferred or services provided in a comparable
uncontrolled transaction. Then such price is to be adjusted on
account of differences, which could materially affect the price in
the open market, if any, between the transactions being compared
or between the enterprises entering into such transaction. Such
adjusted price can be called as arms length price computed under
this method. This method involves comparison of prices both
internal and external.
RESALE PRICE METHOD:
Under this method, the first step is to identify the price at which
property purchased or services obtained by the enterprise from an
Associated enterprise is resold or are provided to an unrelated
enterprise. From such resale price, the amount of a normal gross
profit margin accruing to the enterprise or to an unrelated
enterprise from same or similar transaction is to be reduced. The
price so arrived is further reduced by the expenses incurred by the
COND Next Slide

enterprise in connection with the said transaction. Then such price


is to be adjusted to take into account the functional and other
differences, including differences in accounting practices, which
could materially affect the amount of gross profit margin in the
open market, between the transactions being compared or
between the enterprises entering into such transactions. Such
adjusted price can be called as arms length price computed under
this method.
COST PLUS METHOD:
Under this method, the first step is to determine the direct and
indirect cost of production incurred by the enterprise in respect of
property transferred or services provided to an associated
enterprise. The next step is to determine the normal gross profit
mark-up to such costs computed according to the same accounting
norms of the enterprise or unrelated enterprise in connection with
the same or similar comparable uncontrolled transaction. The said
normal gross profit mark-up is to be adjusted on account of
functional and other differences if any, which could materially
affect such profit mark-up in the open market, between the
transactions being compared or between the enterprises entering
into such transaction. Such profit mark-up is to be added in the
cost calculated as per the first step. The sum so arrived at, can be
called as arms length price computed under this method.

TRANSACTIONAL PROFIT METHOD

PROFIT SPLIT METHOD:


Under this method, the first step is to determine the combined net
profit of the Associated enterprise arising from the international
transaction in which the enterprises are engaged. After that the
relative contribution made by each of the associated enterprise
the combined net profit is evaluated on the basis of the functions
performed, assets employed or to be employed, reliable external
data and risks assumed by each enterprise. The combined net
profit is then split amongst the enterprises in proportion of their
relative contributions and such apportioned profit shall be taken
into account to arrive at the arms length price in relation to the
international transaction.

TRANSACTIONAL NET MARGIN METHOD:


Under this method, first the net profit margin realized by the
enterprise from an international transaction entered into with an
Associated enterprise is computed in relation to costs incurred
or sales effected or assets employed or to be employed or any
other relevant base. Then the net profit margin realized
COND Next Slide

by the enterprise or by an unrelated enterprise from a comparable


uncontrolled transaction is computed with regard to the same
base. Such net profit margin arising in comparable uncontrolled
transactions is to be adjusted on account of differences if any,
which could materially affect the net profit margin in the open
market, between the transactions being compared or between the
enterprises entering into such transaction.

SUMMARY OF METHODS
Methods

CUP

RPM

Product
Comparability
Very High

High

CPLM

High

PSM

Medium

Functional
comparability

Approach

Remarks

Prices are
benchmark
ed

Very difficult to
apply as very
high degree of
comparability
required

Medium

GPM (on
sales)
benchmark
ed

Difficult to apply
as high degree
of comparability
required

High

GPM (on
costs)
benchmark
ed

Difficult to apply
as high degree
of comparability
required

Profit Margins

Complex Method,
sparingly used

Net Profit

Most commonly
used Method

Medium

Very High

TNMM

Medium

Very High

SELECTION OF MOST
APPROPRIATE METHOD
THE MOST APPROPRIATE METHOD SHALL BE SELECTED HAVING REGARD
TO THE FOLLOWING:
The nature and class of the international transaction;
The class or classes of associated enterprise entering into the
transaction and the functions performed by them taking into account
assets employed or to be employed and risks assumed by such
enterprises;
The availability, coverage and reliability of data necessary for
application of the method;
The degree of comparability existing between the international
transaction and the uncontrolled transaction and between the
enterprises entering into such transactions;
The extent to which reliable and accurate adjustments can be made
to account for differences, if any, between the transactions being
compared and the enterprises entering into such transactions;
The nature, extent and reliability of assumptions required to be made
in application of a method; It is provided that where more than one
price is determined.

COMPARABILITY FACTORS
FOR COMPARING AN INTERNATIONAL TRANSACTION WITH AN
UNCONTROLLED TRANSACTION, REFERENCE SHOULD BE MADE TO
THE FOLLOWING:
The specific characteristics of the property transferred or services
provided in either transaction;
The functions performed, taking into account assets employed or
to be employed and the risks assumed, by the respective parties to
the transactions;
The contractual terms (whether or not such terms are formal or in
writing) of the transactions which lay down, explicitly or implicitly
the responsibilities, risks and benefits to be divided between the
respective parties to the transactions;
Conditions prevailing in the markets in which the respective
parties to the transactions operate, including the geographical
location and size of the markets, the laws and government orders
in force costs of labor and capital in the markets, overall economic
development and level of competition and whether the markets are
wholesale or retail.

TRANSFER-PRICING AUDIT

Limit of Rs. 5 Crores has been enhanced to Rs. 15 Crores


with effect from Financial Year 2005-06.
Use of data in the year the transaction takes place; however
at the time of preparation of documentation the assesses had
access to data only of prior years. TPOs are seeking to rerun
comparable search with current data.

ASSESMENT PROCEDURE
File tax return & Accountants Report (30th September)
i
Reference to be made to TP Officer (TPO) by the Assessing Officer (AO); Compulsory Reference to be made by
AO if international transaction exceed Rs 50 million
i
Notice to be issued by the TPO for calling supporting documents and evidences
i
TP Audit
i
Preparation of Draft order
i
Passing of order within 1 month from the end of the month if No Objection on the draft order by the Tax
payer within 30 days or time expires for filing the objections within 30 days
i
If tax payers has objection he will file objections to Dispute Resolution Panel within 30 days from the
date of draft order
i
Dispute Resolution after hearing TPO and Tax payer along with evidences will either give directions to
the TPO or no directions, within 9 months from the end to the month in which the draft order is
forwarded to the tax payer
i
Within 1 month from the end of the month in which direction is received, or expiry of 9 months
whichever is earlier, the TPO will pass the final order in conformity with the directions of the Dispute
Resolution Panel
i
Based on results of the above mentioned procedure Assessing Officer will pass the order

REPORTING REQUIREMENTS
Every tax payer entering into international transaction to obtained
an accountant report in prescribed form i.e. Form 3CEB.
Every accountant report to be submitted on or before the due date
for filing tax return
Accountant report contain the following information
Contains summary of international transaction
Contains details of tax payer
Contains method employed to determine ALP

DOCUMENTATION
ENTITY RELATED

PRICE RELATED

Profile of industry

Transaction terms

Agreements

Profile of group

Functional analysis
(functions, assets
and risks)

Invoices

Profile of Indian
entity
Profile of
associated
enterprises

Economic analysis
(method selecting,
comparable
benchmarking)
Forecasts,
budgets,

TRANSACTION
RELATED

Pricing related
correspondence
(letters, emails
etc.)

PENALTY
DEFAULT
In case of a post inquiry
adjustment, there is deemed to
be a concealment of income

NATURE OF PENALTY
100 300 % of tax on the
adjusted amount

Failure to maintain documents

2% of the value each


international transaction

Failure to furnish documents

2% of the value each


international transaction

Failure to furnish accountants


report

Rs. 100,00

KEY ISSUES/CONTROVERSY
Use of secret comparables not prohibited
Selection of time period
Availability of corporate data
Limited guidance on adjustment methodology
Avoid loss making companies and negative net worth
Circular interferes with the judicial discretion of TPO
No safe harbor clause provisions
No advance pricing agreement provision
Use of current data rather than data available up-to the date of
filing of Tax return
No significant legal precedents on Transfer pricing matters as yet
No use of earlier years data

RECENT EXPERIENCES/
TAKE-AWAY
Adjustment allowed

Working capital
Risks
Growth
IP
Under utilization of capacity
Difference in accounting policies

Loss making comparables accepted except continuous loss


making companies
Independent comparable having related party transactions
(more than 15%) not accepted
OECD and US Guidelines on Transfer Pricing accepted
Emphasis on FAR analysis than other economic factors
COND Next Slide..

Segmental results to be considered


Transfer Pricing not an exact science and hence reasonable
presumption and approximation accepted
Multiple year data generally not accepted
Transfer Pricing law in India at very infancy stage
Start-up company and low net worth companies not
accepted
In TNMM, comparability at broader level in terms of
product accepted

DOMESTIC LAW DISPUTE


RESOLUTION PROCESS
Transfer
Pricing
Officer

Order passed
within 1 month
from end of the
month in which
direction from
Dispute
Resolution Panel
is received or
end of 9 month
from the end of
month in which
draft order is
forwarded.

Dispute
Resolution

Appellate
Tribunal

High Court

Supreme
Court

Panel

Direction to
be issued
within 9
month from
the end of the
month in
which
objection are
forwarded

Final fact
finding
authority
No specific
time limit
Generally
order
passed
within 2 4
years from
filing of
appeal
Revenue
can also go
on appeal if
Commission
er decides
in favor of

Final fact finding


authority
No specific time
limit
Generally order
passed within 2
4 years from
filing of appeal
Revenue can
also go on appeal
if Commissioner
decides in favor
of taxpayer

INTERNATIONAL DISPUTE RESOLUTION


PROCESS
(MUTUAL AGREEMENT PROCEDURE PROCESS)
Overseas
Taxpayer

Overseas
Taxpayer can
invoke CA
proceedings in
case there is
double
taxation or
taxation not in
accordance
with the tax
treaty
Technically,
application is
possible even
before
assessment is
made.

Overseas
Competent
Authority
If overseas CA
consider the
application
appropriated,
application
forwarded to the
Indian CA

Indian
competent
Authority

India Tax
administration

Indian CA ON
RECEIE OF map
REQUEST FROM
OVERESAS CA
could consider the
same for
discussion

In case the
matter is
resolved
between the
CAs and
accepted by the
Taxpayer, the
same is
communicated
to the Tax
Officer

CAOVERSEAS CA
Additional
could request
information could
Taxpayer for
be requested
additional
before the cases
information
in expected
Overseas
and India CAs would initiate
negotiate negotiation and attempt to
reach an amicable resolution

CAs may set up certain procedures/guidelines which they will adhere to during
the negotiation process
In case the CAs reaches a resolution, the proposed agreement should be
communicated to the Taxpayer for his acceptance.
Taxpayer has option not to accept the agreement in case it is detrimental
taxpayer may seek correlative relief in the overseas jurisdiction

EVALUATION OF ALTERNATIVE
DISPUTE RESOLUTIO OPTIONS
Criteria

Map

Appeal

Time frame

Generally 1-2 years

Can range from 2 to 20 years,


depending upon level

Approach

Taxpayer involvement
Binding nature

More scope for negotiation


/compromise, CAs could
agree on a middle path
At the discretion of CA
Binding on CA, Taxpayer need
mot accept if detrimental can
continue with domestic tax
law appeal

Legalistic approach, no negotiations

Significant involvement
Binding, but sequential appeals ca be
made to higher judicial authorities.

Double tax mitigation

Possibility of avoiding double tax


impact through correlative
relief

Double tax exposure if appeal is


against taxpayer, correlative relief
to be separately pursued.

Collection of taxes

MOU for suspending collection of


taxed (with US)

STAY FO DEMAND AT THE DISCRETIO


OF THE Tax officer and Appellate
Authorities

Finally

Greater change of reaching


finality, decision of CA
binding on Tax officer

Tax officer can prefer appeal if firstlevel appeal is in Taxpayers favor

Experience

Inadequate experience in TP, but


better general appreciation
of international tax issues

Coverage

Possibility of covering even


subsequent years on the
basis of anticipated adverse
results

n/Limit TP experience at this stage

Would need t await assessment order


for ach year before filing appeal.

WHAT WE DO FOR QUARK


SOFTWARE
WE OFFER THE FOLLOWING:
REPRESENTATION SERVICES

Income Tax
International Tax
Transfer Pricing
Appeal

REPRESENTATION SERVICES

Service Tax
Foreign Investment Promotion Board
Department of Company Affairs
Exchange Control Department
STPI
COND Next Slide.

REVIEW SERVICES
AUDIT & ASSURANCE SERVICES
Management audit
Special audit
CERTIFICATION
COMPLIANCE & PLANNING SERVICES
OPINIONS
CONSULTATIONS & ADVISORY SERVICES
SIGNATORY SERVICES

TAX CALENDER

SL NO.

NAME OF
COMPANY

TYPE

STATUS AS ON
16.11.2010

AUTHORITY
QUARK SYSTEMS PVT. LTD

A
A/Y 2004-05

Appeal- Department

Third Appellate Authority


(High Court)

Date not fixed as we are not


confirmed whether dept.
will go in appeal

A/Y 2005-06

Appeal- Department

Second Appellate Authority


(ITAT)

Case adjourned to 08.12.2010

A/Y 2006-07

Appeal Company

Dispute Resolution Panel

Order Received

A/Y 2007-08

Scrutiny/Audit

Tax Officer

Case is fixed for 17.11.2010

A/Y 2007-08

Scrutiny/Audit

Transfer Pricing Officer

Order received

A/Y 2008-09

Scrutiny/Audit

Tax Officer

Case is fixed for 17.11.2010

A/Y 2009-10

Scrutiny/Audit

Tax Officer

Case is fixed for 17.11.2010

1
2

QUARK MEDIA HOUSE INDIA PVT. LTD

Second Appellate Authority


(ITAT)

Case is fixed for 08.12.2010

Appeal- Department

Second Appellate Authority


(ITAT)

Hearing is under progress

A/Y 2007-08

Scrutiny/Audit

Tax Officer

Case is fixed for 22.11.2010

A/Y 2007-08

Scrutiny/Audit

Transfer Pricing Officer

Order received

A/Y 2008-09

Scrutiny/Audit

Tax Officer

Case is fixed for 22.11.2010

A/Y 2008-09

Scrutiny/Audit

Transfer Pricing Officer

Documents & Submission


submitted

Tax Officer

Case is fixed for 22.11.2010

A/Y 2009-10

Scrutiny/Audit

A/Y 2005-06

Appeal- Department

A/Y 2006-07

QUARK COMMERCE INDIA PVT. LTD

Second Appellate Authorities


(ITAT)

Case is fixed for 08.12.2010

Scrutiny/Audit

First Appellate Authority


(CIT-A)

Hearing is under progress

A/Y 2008-09

Scrutiny/Audit

Tax Officer

Date not fixed

A/Y 2008-09

Scrutiny/Audit

Transfer Pricing Officer

Documents & arguments


submitted

A/Y 2009-10

Scrutiny/Audit

Tax Officer

Company merged

A/Y 2005-06

Appeal- Department

A/Y 2006-07

QUARK INDIA PVT. LTD

d
1
2

A/Y 2004-05

Appeal- Department

Second Appellate Authorities


(ITAT)

Hearing under progress

A/Y 2008-09

Scrutiny/Audit

Tax officer

Case is fixed for 25.11.2010

THANK YOU

www.ramanaggarwal.com
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