It has been brought to the notice of CBDT that there is divergence of views amongst the field officers and taxpayers regarding the functional profile of development centres engaged in contract R&D services for the purposes of transfer pricing audit. Moreover, while at times taxpayers have been insisting that they are contract R&D service providers with insignificant risk, the TPOs are treating them as full or significant risk-bearing entities and making transfer pricing adjustments accordingly. The issue has been examined in CBDT. It is hereby clarified that a development centre in India may be treated as a contract R&D service provider with insignificant risk if the following conditions are cumulatively complied with

It has been brought to the notice of CBDT that clarification is needed for selection of profit split method (PSM) as most appropriate method. The issue has been examined in CBDT. It is hereby clarified that while selecting PSM as the most appropriate method, the following points may be kept in mind

The Directorate of Income-tax (Systems) has issued a letter dated 21.03.2013 drawing attention to the judgement of the Delhi High Court in Court on Its Own Motion vs. CIT where directions were issued that the department has to follow the procedure prescribed in s. 245 before making any adjustment of refund payable by the CPC. As the Court has held that the assessee must be given an opportunity to file a response before any adjustment of refund is made, the Assessing Officers have been directed to comply with the High Court’s order and communicate their findings on adjustable demand to the CPC which will then process the refund and adjust the demand

However, it has been pointed out that the language of the proposed sub-section (5) of section 90 could mean that the Tax Residency Certificate produced by a resident of a contracting state could be questioned by the Income Tax Authorities in India. The government wishes to make it clear that that is not the intention of the proposed sub-section (5) of section 90. The Tax Residency Certificate produced by a resident of a contracting state will be accepted as evidence that he is a resident of that contracting state and the Income Tax Authorities in India will not go behind the TRC and question his resident status

The Finance Bill 2013, as introduced in Parliament today, 28th February 2013, is available for download

Vide Order No. 26 of 2013 dated 08.02.2013, the CBDT has promoted officers in the grade of Commissioner/ Director of Income-tax to the grade of Chief Commissioner of Income-tax in the pay scale of Rs. 67,000 – 79,000 with immediate effect

The CPC has issued a letter dated 30.01.2013 pointing out that there are 28,444 returns filed for AY 2012-13 where the refund is in excess of Rs. 10 lakhs which are pending processing. The CPC has directed the AO’s to check within 21 days whether any demand is outstanding in these cases and stated that in case no response is received, the e-returns shall be processed (and refund granted)