The Finance Minister of India introduced the Finance Bill, 2012, on 16 March 2012 in which with respect to transfer pricing, the introduction of an advance pricing agreement (APA) program as well as other transfer pricing-related items has been proposed.
Undertaking an international transaction, the Central Board of Direct Taxes is empowered to enter into an APA with any person . The APAs can be-Unilateral,Bilateral or Multilateral. The term of the APA can not exceed five consecutive years.The APA would be legally binding on the taxpayer and the income tax authority for the international transactions to which the APA applies, unless there is a change in law or facts.The arm’s length price can be determined under any method, whether prescribed or not.
The taxpayer would file a modified return within three months from the end of the month in which the APA was entered into for applicable fiscal years when income tax return has already been filed.
