"Prime Minister directs Department of Revenue to make public report of Rangachary Committee on Taxation of Development Centres & IT Sector," the Prime Minister's Office said today.
The committee, headed by former Central Board of Direct Taxes (CBDT) chairman N Rangachary, was set up by the Prime Minister in July 2012. The panel had submitted its report in September, 2012, suggesting parameters to identify contract R&D services provider with insignificant risk and application of profit split method, among others.
Following the report, CBDT issued circulars to streamline taxation rules in line with the recommendations of the panel. The circulars, issued with relation to the applicability of Transfer Pricing rules for taxation of development centres in the IT sector, will help in providing certainty to taxpayers, the Finance Ministry had said earlier.
The development centres, it said, should be treated as contract R&D service provider to their foreign principal if the risk attached to such centres is insignificant. The Transfer Pricing officers, while deciding on taxation issues concerning development centres, it said, should look into the conduct of the parties and not on mere contractual terms.
The committee was also asked to engage in sector-wide consultations and finalise the Safe Harbour provisions announced in Budget 2010 sector-by-sector. Safe Harbour principles are international disclosure practices to check litigations in transfer pricing - an accounting mechanism undertaken by MNCs to reduce tax liabilities.
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