The Central Board of Direct Taxes (CBDT) withdrew Circular No. 2/2013 on June 2013as it gives the impression that the profit split method is the preferred method in cases involving unique intangibles or in multiple interrelated international transactions. Although the profit split method may be the most suitable transfer pricing method in these situations is should not be regarded as a preferred method.
The CBDT has also modified Circular No. 3/2013 relating to development centers. Circular No. 2/2013 appeared to give the impression that there was a hierarchy among the six transfer pricing methods listed in section 92C and that the Profit Split Method was the preferred method in cases involving unique intangible or in multiple interrelated international transactions. As there is no hierarchy among the transfer pricing methods the Central Board of Direct Taxes has withdrawn circular No 2 dated March 26, 2013 with immediate effect.
Another circular (No 3) has also been amended and a new set of guidelines has been issued for identifying the Development Centre as a contract R&D service provider.
