Date:15/06/2004 URL: http://www.thehindubusinessline.com/2004/06/15/stories/2004061502210300.htm

Back PHDCCI plea on transfer of assets between group cos

K.R. Srivats

New Delhi , June 14

THE PHD Chamber of Commerce and Industry (PHDCCI) has suggested that any transfer of assets between group companies in a bona fide worldwide restructuring exercise should not trigger the transfer pricing regulations of the country.

In its pre-budget submissions to the Finance Ministry, the chamber has highlighted that the current Indian provisions on transfer pricing do not specifically exempt transfer of assets between group entities even in a bona fide worldwide restructuring exercise.

The chamber has claimed that the triggering of transfer pricing regulations in such instances would increase the cost of restructuring and also be an impediment to the implementation of the restructuring scheme.

PHDCCI has also sought further flexibility in the determination of arm's length price in the context of international transactions with associated enterprises.

The transfer pricing regulations provide that where more than one price may be determined by the most appropriate method, the arm's length price should be taken to be the arithmetical mean of such prices.

Following industry demand that a range of acceptable arm's length prices be permitted in case the most appropriate method produces more than one acceptable price, the revenue department had permitted a 10 per cent range - i.e., a 5 per cent band below and a 5 per cent band above the arithmetic mean — for arriving at the arm's length price.

As against the current permissible 5 per cent price band, the chamber has now suggested that a 15 per cent price flexibility be provided.