INDIA Law and Practice Contributed by: Deepak Chopra, Harpreet Singh Ajmani, Rohan Khare, Pulkit Pandey and Priyam Bhatnagar, AZB & Partners
8. Penalties and Documentation 8.1 Transfer Pricing Penalties and Defences Chapter XXI of the IT Act spanning from Sec - tion 270 to 275 provides for various penalties which are imposable under the Act. The follow - ing provisions specifically pertain to penalties in a transfer pricing context. Section 271AA(1) of the IT Act provides for a levy of penalty at the rate of 2% of the aggregate of international transactions in the following events: • failure to keep the transfer pricing documen - tation ready on or before the due date; • failure to report any international or specified domestic transaction; • maintaining/furnishing incorrect information or an incorrect document; or • failure to furnish the transfer pricing docu - mentation on request to Tax Authorities within the permitted time period. Section 271G of the IT Act provides for a levy of penalty at the rate of 2% of the value of the transaction in question, where a person fails to furnish any information required to be furnished as per Section 92D(3) of the IT Act. Further, in terms of Section 273B of the IT Act, no penalty would be imposable provided there exists “reasonable cause” on the part of the tax - payer for the failure contemplated in the charg - ing section. 8.2 Transfer Pricing Documentation Section 92D of the IT Act provides that every person who has entered into an international transaction or specified domestic transaction shall keep and maintain such information and document in respect thereof as may be pre -
relevant to the 1st assessment year for which such application is made. • In respect of remainder transactions – at any time before undertaking the transaction/s. 7.6 APA User Fees In terms of Rule 10-I of the IT Rules, the appli - cation for an APA shall be accompanied with a statutory fee which is determined in the following manner: • if the international transaction entered into or proposed to be entered into does not exceed INR100 crore (1 crore equals 10 million), the statutory fee for filing of APA shall be INR10 lakhs (1 lakh equals 100,000); • if the international transaction entered into or proposed to be entered into does not exceed INR200 crore, the statutory fee for filing of APA shall be INR15 lakhs; and • if the international transaction entered into or proposed to be entered into exceeds INR200 crore, the statutory fee for filing of APA shall be INR20 lakhs. 7.7 Duration of APA Cover The Indian APA programme seeks to provide certainty to taxpayers for five prospective years. The law also offers a roll back option for the pre - vious four years, subject to certain conditions. Thus, in India, an APA can give certainty for a total of nine years with roll back, and five years without roll back. 7.8 Retroactive Effect for APAs In terms of the repose to 7.1 Programmes Allowing for Rulings Regarding Transfer Pric- ing , subject to fulfilment of certain conditions prescribed under the IT Act and IT Rules, there is provision for the roll back option to cover the previous four years.
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