INDIA Law and Practice Contributed by: Deepak Chopra, Harpreet Singh Ajmani, Rohan Khare, Pulkit Pandey and Priyam Bhatnagar, AZB & Partners
• location-related intangible assets, such as leasehold interest, mineral exploitation rights, easements, air rights, and water rights; • goodwill-related intangible assets, such as institutional goodwill, professional practice goodwill, personal goodwill of professional, celebrity goodwill, and general business going concern value; • methods, programmes, systems, procedures, campaigns, surveys, studies, forecasts, esti - mates, customer lists, or technical data; and • any other similar item that derives its value from its intellectual content rather than its physical attributes. Apart from the above, OECD Transfer Pricing Guidelines which on various occasions have fulfilled the role of a guide in the journey of navi - gating through the transfer pricing landscape in India, provides for an extensive literature on transfer pricing with respect to intangibles and are often referred to by the courts of the country whenever required. 4.2 Hard-to-Value Intangibles Hard-to-value intangibles (HTVIs) in terms of Paragraph 6.1893 of BEPS Action Plan 8–10, have been defined to mean those “intangi- bles” or “rights in intangibles” where there is an absence of a reliable comparable/future cash flow or expected income projections from the transfer of such intangible to an AE at a future date. The transfer pricing regime in India as on date does not have specific provisions govern - ing such situations. 4.3 Cost Sharing/Cost Contribution Arrangements As per the UN Practical Manual on Transfer Pric - ing for Developing Countries 2021, Cost Con - tribution Arrangements (CCA) are contractual agreements between associated enterprises in
an MNE group in which the participants share certain costs and risks in return for having a proportionate interest in the expected outcomes arising from the CCA. Broadly, there are two dis - tinct categories of CCAs: • arrangements for sharing in the costs and benefits of inter-company services (service sharing arrangements); and • arrangements established for the develop - ment, production, or obtaining of intangibles or tangible assets (development arrange - ments, most typically intangibles develop - ment arrangements). The Indian transfer pricing provisions are equal - ly applicable to cost-sharing/cost-contribution arrangements. For discussion purposes, the authors have discussed the former category; ie, arrangement for benefits of inter-company services. In the case of availing of services like accounting, tax, marketing, HR, general adviso - ry, etc, by the Indian enterprise, more often than not, such arrangements are questioned by the Indian Tax Authorities by examining the “busi- ness exigency” , “commercial prudence” and “need” for availing such services whilst seek - ing refuge under the argument of an independ - ent third-party refraining from entering such an arrangement. In this context, the OECD whilst acknowledging such a view of the authorities has also cautioned the tax administrations to not automatically assume that by entering into such arrange - ments the multinational corporations (MNCs) are manipulating profits. Further, the OECD whilst addressing the issue has advised the authori - ties to restrict themselves to ascertain whether intra-group services have been rendered or not.
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