India: Implications of APA on pre-rollback transactions | KPMG | GLOBAL
Share with your friends

India: Implications of APA on pre-rollback transactions

India: Implications of APA on pre-rollback transactions

The Chennai Bench of the Income-tax Appellate Tribunal admitted the taxpayer’s advance pricing agreement (APA) as additional evidence about the characterization of international transactions. Thus, the decision reflects possible implications of an APA on the characterization of international transactions in prior years.


Related content

The case is: Lotus Footwear Enterprises Ltd. (India Branch) v. DCIT (ITA Nos. 779/Mds/2014, 801/MDs/2015, 810/Mds/2016)


The taxpayer was engaged in the manufacture of footwear for its related party in the British Virgin Islands. The taxpayer did not characterize itself as a contract manufacturer for the years at issue. The Transfer Pricing Officer, however, recharacterized the taxpayer as a contract manufacturer, and proposed transfer pricing adjustments that were upheld by the Dispute Resolution Panel. 

The taxpayer sought to introduce its APA as additional evidence and asserted that the APA had a bearing on the issues in the years on appeal. The taxpayer stated that it became a contract manufacturer only after multiple labor strikes during the period 2010-2011. The APA was concluded in May 2016 and was applicable from FY 2014-2015 onwards, with the “rollback” period reduced to three years (instead of four years). 

The tribunal admitted the APA, and took note of the taxpayer’s claim that it had only become a contract manufacturer given the APA rollback of three years. The tribunal set aside the findings of the lower authorities, and returned the case to the Transfer Pricing Officer for a fresh adjudication. 


Read an October 2016 report [PDF 330 KB] prepared by the KPMG member firm in India: Concluded APA has a considerable bearing on characterisation of prior years’ international transactions 

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Request for proposal