Journal Press India^®

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The Income Tax Appellate Tribunal of the Bangalore Bench in India laid down a crucial verdict in relation to a question of law that arose in 2018 concerning the tax assessment year 2014-2015. It finally reached its final destination, after a series of appeals, in February 2023 in the case of Palmer Investment Group Ltd vs. DCIT. In a nutshell, the Tribunal decreed that a transaction with an unrelated entity would be subjected to TP regulations if the said entity later becomes a related party in the same tax year. This begs the question: can a tax administration or a court retrospectively treat independent parties to an independent transaction as Associated Entities (“AE”) to a transaction which would then be deemed as a related party (“RP”) transaction? This jurisprudence is unique in itself as it is a one-of-a-kind situation, probably unseen in any other fiscally advanced country, and provides an interesting interpretation of the law taking into account the intention of the parties.

Keywords

OECD; Transfer Pricing; Transfer Pricing Methodology; International Taxation; Tax Administrations

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