Questionnaire

TRANSFER PRICING IN INDIA:

IMPACT OF TRANSFER PRICING ON PROFIT PLANNING OF COMPANIES:
A PERCEPTIONAL STUDY AMONG THE SELECTED TOP MANAGEMENT EXECUTIVES
Scholar: Mr. Sathya Kumar Supervisor: Dr.V.M.Ponniah
Section-I. Profile of Companies
Q1 Nature of operations carried out Response Q9 What is the range of average Response
quantum of TP adjustment faced by
the company
Manufacturing 1 Nil 1
Trading/Distribution 2 Less than Rs.25 Crores 2
Service 3 Rs.26-50 Cores 3
Construction 4 Rs.51-75 Crores 4
Financial services 5 Above Rs.75 Crores 5
Q2 Do you have TP issues and referred to Response Q1 Type of products/service business Response
TP audit 0
Yes but resolved 1 Consumer Products 1
No Issues 2 Industrial Products 2
Once 3 IT/ITES industry 3
Twice 4 Service industry 4
More than twice 5 Financial services 5
Q3 Responsibility of transfer pricing Response Q1 Are you aware and preparing to TP Response
activities within the group 1 policy change due to the recent
focus by the OECD on the BEPS
Indian headquarters 1 Highly aware 1
Regional head quarters 2 Aware 2
Global head quarters 3 Somewhat aware 3
Both Regional and Global 4 Not aware 4
Changes based on need 5 Not at all aware 5
Q4 Feedback on level of efforts involved in Response Q1 Prime Challenges faced while Response
the TP documentation and Form 3CEB 2 implementing global TP policy /
certification exercise global structures in India
Very high 1 Acceptability by Indian revenue 1
authorities
High 2 Indirect tax implications 2
Moderate 3 Documentation requirement 3
Low 4 TP audit awareness 4
Very low 5 Consistency in Reporting 5
Q5 TP audit experience Response Q1 Which first appellate forum, in your Response
3 experience, is a better option for the
taxpayer?
Highly co-operative 1 CIT-A 1
Mutually understanding 2 Both CIT-A and DRP 2
Give and take approach 3 DRP 3
Subjective based 4 Neither CIT-A nor DRP 4
Rigid and Issues Pending 5 Arbitrator form 5
Q6 Reliefs granted by ITAT to companies Response Q1 Experience with ‘Advance Pricing Response
on TP adjustment 4 Agreements’(APA) as a dispute
settlement mechanism
Highly encouraging 1 Nascent stage, long way to go 1

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 Considerable 2 Reasonably good 2
Moderate 3 Promising and result oriented 3
Below Average 4 Unjustified amount of time and cost 4
involved
Nominal 5 Lack of trust among corporates 5
Q7 Your experience with mutual agreement Response Q1 Business impact of Companies Act, Response
procedures(MAP) as a dispute 5 2013 and Clause 49 of Equity Listing
settlement mechanism Agreement
Highly satisfied 5 Very high 1
Satisfied 4 High 2
Somewhat satisfied 3 Moderate 3
Not satisfied 2 Low 4
Not at all satisfied 1 Very low 5
Q8 Most expected aspects from TP Response Q1 What is your opinion on TP affecting Response
consultants 6 Profit planning of the firm
Report quality 1 Strongly agree 5
Bench marking-Fit for purpose and not 2 Agree 4
an intellectual toy
Professionalism-Guidance, expertise 3 Somewhat agree 3
and cost-effective solution
Information sharing 4 Disagree 2
Accessibility-Working like a business 5 Strongly disagree 1
partner

Section-II: Awareness on the Transfer price tax regime and related issues
Q17. Transfer pricing and Awareness and Tax planning
Q.17 Statement SA A SWA DA SDA
1 I understand what transfer pricing is
2 I understand what transfer pricing rules are
3 The transfer price set by a company affect intercompany transactions with
related parties
4 The intercompany transactions are based on mutually accepted
intercompany agreements
5 Performance management is based on the level of sales& profits
6 Transfer prices affect the level of sales/profits achieved by the company
7 The parent company determines the profit allocation in each subsidiary
8 The company understates it revenue for tax purposes
9 The company has been reporting losses due to high costs allocated by
the other related parties
10 Weather differential transfer pricing is applicable to all the transactions in
same manner

Section-III: TP policy frame work and related issues in transfer pricing (external factors)
Q18. Perceptions on TP policy frame work planning among the respondents
Q18 Statement SA A SWA DA SDA
1 Our company has a global TP policy

2 TP policy guidelines for the group are laid down clearly and completely
3 The company or group has stringent mechanisms to monitor the
implementation of the TP policy on a timely basis

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 4 The group headquarters review and provide high-level comments on the
TP documents prepared for India
5 The company is able to effectively leverage on the global TP
documentation while preparing annual India-specific TP Documentation
6 India is an exception to the implementation of global TP policy
7 Active involvement in Taking strategic decisions / planning in respect of
transfer pricing arrangements within the group?
8 Implementing and reviewing the strategic decisions in respect of transfer
pricing arrangements within the group?
9 Recording practices and data storage need improvement from both sides
10 Data consistency and redundancy issues to be sort out due to frequent
changes in policy

Section- IV- Issues and challenges in the adoption and implementation of transfer pricing
Q19. Indicate your level of agreement on the issues in the adoption and implementation of Transfer pricing in India
Q19 Statement SA A SWA DA SDA
1 Transfer Pricing has become the most discussed tax topic today in
corporates
2 Transfer pricing is one of the most complex tax issues faced by the
business.
3 Coping with frequently changing Transfer Pricing provisions is a difficult
task.
4 Whether the time period of 8 years to keep and maintain the necessary
information after the assessment year is acceptable.
5 Indian Government has not put enough effort to solve the problem of
increasing Transfer Pricing litigations.
6 Documentation procedure
7 Stages of clearances
8 Methods applied in deciding Arm's Length Price
9 Audit procedure related issues
10 Cooperation of Transfer Pricing authorities in Transfer Pricing decision
process

Q20. Key areas of issues in Transfer pricing transactions in India

Q.20 Statement SA A SWA DA SDA
1 Cross-border transactions have increased exponentially

2 Lack of consensus on certain Transfer Pricing Issues

3 Challenges in the Comparability Analysis

4 Issue Relating to Risks
5 Arm’s Length Range
6 Comparability Adjustment
7 Location Savings
8 Intangibles,
9 R&D activities
10 Financial transactions,
11 Intra-group services
12 Taxpayers in India can postpone payment of tax liability by
resorting to litigation
13 Availability of multiple channels to resolve disputes in India
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 14 Management charges
15 Lack of Evidencing the delivery of services

Q21. What are the hurdles you encountered while working on the information and details requisitioned by the TPOs
during the course of TP audits?
Q.21 Statement SA A SWA DA SDA
1 Information pertains to an earlier period and retrieval
becomes challenging due to admin issues and employee
turnaround
2 Information being voluminous and / or may not be relevant,
is however insisted during the course of TP audits
3 Required information pertains to the AEs, which is not
readily available and the group usually is not willing to share
information
4 Certain data is not statutorily required to be maintained, but
is asked by TPO
5 Lack of awareness and associated issues

Section- V- Perceptions on Issues and challenges and impacts of TP audit among the firms
Q22. What are the key issues deliberated on during the course of the company’s TP audit?
Q.22 Statement SA A SWA DA SDA
1 Acceptance or rejection of comparables
2 Multiple year data vs single year data
3 Rejection of economic adjustments
4 Low profitability or losses
5 Questioning commercial expediency
6 Benefit of +/-5%
7 Receipt of services and benefits test
8 Operating vs non-operating
9 Adhoc TP adjustments
10 Selection of tested party
11 Change in TP method
12 Entity level vs transaction level
13 Change of profit level indicator

Q23. Major challenges faced in compliance with specified domestic transactions

Q.23 Statement SA A SWA DA SDA
1 Identifying domestic related parties
2 Benchmarking certain transactions
3 Ensuring consistency with other disclosures like Form 3CD
4 Lack of experience in dealing with transfer pricing concepts
5 Consistency and data omission issues

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Section-VI- Preferences and expectations of the firms to deal with transfer pricing transactions in the sample
Q24. What are your expectations from the rules to be prescribed by the CBDT with respect to the use of multiple-year
data and range concept?
Q.24 Statement SA A SWA DA SDA
1 Allowing use of multiple-year data of tested party as well as
comparable companies
2 Allowing use of multiple-year data and range concept with
retrospective effect
3 Specifying that the range concept to be akin to the inter-
quartile range concept accepted globally
4 Range and arithmetic mean concepts to not co-exist:
arithmetic mean to be done away with
5 Issues with consistency of data leads to more issues

Q25. How significantly will the change in regulations pertaining to the use of multiple-year data and use of range impact
the level of existing and future TP disputes in India?
Q.25 Statement SA A SWA DA SDA
1 If allowed with the retrospective effect, could significantly
reduce existing TP litigation
2 Significantly reduce future TP litigation
3 Allow for higher level of certainty in TP planning in India
4 Many companies voluntarily come forward to compliance of
TP audit
5 Increases the level of awareness and co-operation
Q26. What would you like to change with respect to the legal provisions pertaining to compliances as per the existing
Indian TP regulations?
Q.26 Statement SA A SWA DA SDA
1 Clear framework for performing economic adjustments to
account for business and commercial reasons
2 Relaxation of annual documentation requirements: may be
updated bi-annually
3 Simplification of Form 3CEB to reduce the details
requested
4 Relaxation of documentation if the company has opted for
Safe Harbor
5 Compliance period should be equal to collection period
and grace period

Q27. Alternate dispute resolution mechanisms preference by you-indicate level of agreement

Q.27 Statement SA A SWA DA SDA
1 Evaluated and opted MAP
2 Evaluated MAP, but not opted
3 Evaluated Safe Harbor, but not opted
4 Evaluated and opted Safe Harbor
5 Evaluated and opted Bilateral APA
6 Evaluated and opted Unilateral APA
7 Evaluated APA, but not Opted
8 Not evaluated any of the ADR mechanisms

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 9 Involvement of third party arbitrator in mutual consent and approval
10 Involvement of Legal arbitrator to settle the issues
Q28. Preferred changes in the provisions prescribed with respect to RTPs
Q.28 Statement SA A SWA DA SDA
1 The definitions of control and significant influence should be
aligned between the 2013 Act and clause 49
2 The shareholder approval under clause 49 on the basis of
'materiality' should not be required
3 Clear framework with respect to the content of policy
pertaining to dealing with RPTs which is to be displayed on
the company website
4Others RTPs provisions needs to be clearly defined sector wise
5 RTPs provisions should be customised with in the sector
based on size of operations

Section- VII: Suggestions to overcome the issues in transfer pricing transactions

Q29. Best practices suggested by CEOs / MDs that an organization needs to implement
Q.29 Best Practices SA A SWA DA SDA
1 Keeping sharp focus on industry trends and take corrective
actions in consultation with TP domain experts”
2 Follow regulatory changes related to TP”
3 Put in place internal controls for TP documentation”
4 Include reasonable mark-up on services rendered to group
companies”
5 Consider industry benchmark of gross margin for doing
business in India
6 Speedy disposal of TP cases
7 Consideration of industry benchmark of gross margin for
doing business in abroad
8 Keeping sharp focus on industry trends and taking
corrective action in discussions with TP domain experts
9 Planning and obtaining prior approval of the audit
committee with respect to related party transactions
10 Convening meeting through video conferencing and
obtaining approval by circular resolution

Q30. Measures to overcome the Litigations in Transfer pricing issues

Q.30 Statement SA A SWA DA SDA
1 Tax payer to have Robust documentation
2 Recent guidelines indicate risk based selection approach for TP Audits.
3 No adjustments are made in cases where the variation between the
arm’s length price determined and the price of the international
transaction does not exceed 3 per cent or other notified percentage
4 Range Concept & multiple year concept notified
5 Significant efforts have been made to provide certainty in the application
of transfer pricing laws
6 There is a time limit for disposal of objection of the taxpayer by the DRP
7 Indicative time limits have been provided for various judicial forums
8 Direct appeal to the tax tribunal is provided against transfer pricing
orders approved by the DRP

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 9 Dedicated and specialized appellate Commissioners and benches of tax
tribunals have been put in place to deal with disputes on transfer pricing
10 The process for Mutual Agreement Procedure(MAP) and Advance Pricing
Agreement Scheme(APAS) has to be put on fast track

Q31. General suggestions to overcome the transfer pricing issues:

Q31 General suggestions SA A SWA DA SDA
1 Prepare group’s global map and plot transfer pricing legal requirements in
each individual country
2 Determine applicability of CbCR and master file for every group entity
3 Define roles and responsibilities within the group to comply with country
specific and group level requirements
4 Perform skill gap analysis –in-house capabilities and transfer pricing
specialist help
5 Define a system for real time/periodic monitoring of data
6 Prepare a calendar for compliances, transfer pricing benchmarking
searches and updates
7 Appropriate interpretation of group wide data collated
8 Perform what-if analysis for the potential questions/inquiries from the tax
authorities
9 Define a system to gather real time evidences that will support the policy
-developing justifications
10 Design a system of regular communication between tax teams and
business strategy/operations team
11 Systems in place to track additional information i.e. addition of new entity
in the group, supply chain changes
12 Give a harmonized picture between CbCR, Master file, and local files and
Year-on-Year disclosures in transfer pricing documentation.
13 Aim for a fine balance between Protect trade secrets and provide
sufficient information and Standardization and customization
14 Use of technology for collation of data and use of data analytics for
transfer pricing risk detection
15 Collating information through exchange of information and coordinated
audit by representatives from two or more jurisdictions
16 Tax and business and operations team should work in sync as there
could be use of subject matter expert witnesses during audit
17 Not to treat transfer pricing as yearend compliance exercise
18 Having substance based transfer pricing policy with emphasis on
establishing fundamentals of transfer pricing instead of legal arguments
19 Reviewing inter-company transfer pricing policy on regular intervals
20 Evaluating option of Advance Pricing Agreements in consultation with
experts

Q32. Any other suggestion, you would like to provide to resolve the issues in transfer pricing transactions in your
company and kind of business related to your kind self……………

Thank you for your kind co-operation

Thanking you
Mr.Sathya Kumar

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