Lok Sabha Question No. 351 (STARRED), answered on 2016-12-09
Subject: Bilateral Advance Pricing Agreement
Ministry: FINANCE
Asked by: VIJAY KUMAR S.R., HEENA VIJAYKUMAR GAVIT

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF REVENUE

## LOK SABHA STARRED QUESTION NO. *351

TO BE ANSWERED ON FRIDAY, THE 9 TH  DECEMBER, 2016

Agrahayana 18, 1938 (Saka)

## BILATERAL ADVANCE PRICING AGREEMENT

## *351.  SHRI S.R.VIJAYAKUMAR : DR. HEENA VIJAYAKUMAR GAVIT:

Will the Minister of FINANCE be pleased to state:

- (a) whether India and the United States of America have reached a deal for  the  first  bilateral  advance  pricing  agreement  and  if  so,  the  details thereof and the terms and conditions thereto;
- (b)  the  benefits  accrued  to  India  from  this  bilateral  advance  pricing agreement;
- (c)  whether  both  countries  have  also  resolved  tax  disputes  through  the Mutual Agreement Procedure; and
- (d) if so, the details thereof and the total amount locked in the dispute?

## ANSWER

MINISTER OF FINANCE                                                               SHRI ARUN JAITLEY

(a) to (d): A statement is laid on the table of the House.

## STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. *351 RAISED  BY  SHRI  S.R.VIJAYAKUMAR  AND  DR.  HEENA  VIJAYAKUMAR  GAVIT, HON'BLE MEMBERS OF PARLIAMENT FOR REPLY ON 9 TH DECEMBER, 2016.

- (a) Yes,  Madam.  India  and  USA  have  reached  an  understanding  at  a recently concluded bilateral meeting between the competent authorities of the  two  countries  to  conclude  the  first  bilateral  APA  between  the  two countries.  The  bilateral  APA  to  be  entered  into  involves  a  multinational company  of  USA  and  its  Indian  subsidiary.  The  agreement  shall  be  for  a period  of  five  years  from  financial  year  2013-14  to  2017-18  and  the  two competent  authorities  have  decided  the  most  appropriate  transfer  pricing methodology  to  price  the  international  transactions  between  the  two companies  and  have  also  decided  the  Arm's  Length  Price  (ALP)  of  the transactions.
- (b) Bilateral  APAs  between  India  and  USA  are  expected  to  reduce  the transfer  pricing  disputes  that  arise  in  respect  of  international  transactions between  related  companies  located  in  the  two  countries.  Besides,  they would lend certainty to international transactions between related companies of the two countries. This would create a conducive environment for multinational  companies  based  in  USA  and  would  attract  foreign investment.  Moreover,  bilateral  APAs  would  reduce  the  time  and  money spent on protracted litigation.
- (c) Yes,  Madam. India  and  USA  have  been  resolving  tax  disputes  under the Mutual Agreement Procedure (MAP) provision contained in the Double Taxation Avoidance Convention (DTAC) between the two countries.
- (d) In the last two years, more than 100 cases of tax disputes have been resolved  by  the  competent  authorities  of  both  countries  under  the  MAP provision. In a recent bilateral meeting between the two countries, another 108 cases of tax disputes have been agreed to be resolved. While the total amount of income locked up in dispute prior to the recent meeting between the two countries was approximately Rs. 12,000 crore, the recent agreement to resolve more than 100 disputes would reduce this amount by approximately Rs. 5,000 crore.