The Central Board of Direct Taxes (CBDT) has issued a very important instruction (Instruction No. 15/2015, dated: October 16, 2015) on the procedure for transfer pricing assessments/audits for international transactions. These instructions will have a far reaching effect on the methodology to be adopted for making reference to the Transfer Pricing Officer (TPO) by the Assessing Officer (AO) and other connected issues:
- In certain cases when reference is to be made by the AO to the TPO, the AO needs to satisfy himself as to the need for such reference and also give personal hearing to the taxpayer; and the objections, so raised, need to be disposed by the AO
- Since transfer pricing cases will henceforth be selected for scrutiny on the basis of risk parameters, value of the international transaction is no more the critical factor for reference to the TPO; however, as per the earlier Instruction No. 3 the limit was INR five crores
- These guidelines shall apply to specified domestic transactions also, till the CBDT issues further instructions
It will be interesting to see what would be the 'risk parameters' set by the revenue authorities for selection of scrutiny assessments.
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