Transfer pricing in India

Introduction
Transfer Pricing (“TP”) regulations have been at the forefront of corporate headlines over the last few years due to the increasing number of controversies resulting out of tax structuring by multinational companies in India. What makes the topic both contentious and interesting is that regulators view the various techniques applied to inter-corporate transactions as purportedly planned with the intent of achieving benefits of comparable labor cost and tax advantage at the cost of a countries tax revenues.
Hence, there was a need to introduce a uniform and internationally accepted mechanism of determining reasonable, fair and equitable profits and tax in India in the case of such multinational enterprises.

Statutory rules and regulations
A separate code on transfer pricing under Sections 92 to 92F of the Indian Income TaxAct, 1961 (“the Act”) covers intra-group cross-border transactions and specified domestic transactions. Since the introduction of the code, transfer pricing has become the most important international tax issue affecting multinational enterprises operating in India. The regulations are broadly based on the Organisation for Economic Co-operation and Development (“OECD”) Guidelines and describe the various transfer pricing methods, impose extensive annual transfer pricing documentation requirements and containharsh penal provisions for noncompliance.

The Indian Transfer Pricing Code prescribes that income arising from international transactions or specified domestic transactions between associated enterprises should be computed having regard to the arm’s length price. It has been clarified that any allowance for an expenditure or interest or allocation of any cost or expense arising from an international transaction or specified domestic transaction also shall be determined having regard to the arm’s-length price. The Act defines the terms international transactions, specified domestic transactions, associated enterprises and arm’s length price.

Advance pricing agreement (APA)
An APA is an agreement between the taxpayer and tax authority determining the pricing of intercompany transactions for future years. In case of a roll-back, it would also include past years. The taxpayer and tax authority mutually agree on the transfer pricing methodology (TPM) to be applied for a certain period of time (generally five years) based on the fulfillment of certain terms and conditions. APA is an effective tool used in several countries with established transfer pricing regimes to avoid future disputes in a cooperative manner.

Documentation requirements
Taxpayers are required to maintain, on an annual basis, a set of extensive information and documents relating to international transactions undertaken with AEs or specified domestic transactions. Rule 10D of the Income Tax Rules, 1962 prescribes detailed information and documentation that has to be maintained by the taxpayer.

Further, it is mandatory for all taxpayers, without exception, to obtain an independent accountant’s report in respect of all international transactions between associated enterprises or specified domestic transactions. The report has to be furnished by the due date of the tax return filing (i.e. on or before 30 November) to avoid stringent penalties prescribed for noncompliance with the provisions of the transfer pricing code.

Transfer pricing disputes
While the initial years of transfer pricing regulations saw a slow rise of TP adjustments being proposed by the tax officers, soon the adjustment volumes increased considerably and reached an epic proportion of Rs. 70,000 crores by FY 2013. After a huge pushback from foreign investors, this number has come down but continues to generate a lot of heat for the taxpayers.

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Procedure for New company Registration in India

Company registration in India is not tough when you have the best consultants by your side. with our guided expertise and you will see that you do not need to worry about a thing. So, go ahead and set up Private Company in India without having to worry about a thing.

Persons desirous of forming a company must adhere to the step by step procedure as discussed below:-

1. Apply for Directors Identification Number and Digital Signatures.
2. Selection of type of the company.
3. Selection of name for the proposed company.
4. Drafting of Memorandum and Articles of Association.
5. Stamping, digitally signing and e-filing of various documents with the Registrar.
6. Payment of Fees.
7. Obtaining Certificate of Incorporation.
8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in case of public companies) for obtaining the certificate of commencement of business.
9. Obtaining Certificate of Commencement of business (in case of public limited companies).
10. Obtain Digital Signatures
11. Selection of the type of company
12. Selection of name Six names are requ1ired to be selected in order of preference after taking notes of numerous provisions, clarifications, circulars and rules made by the Ministry of Corporate Affairs, etc. In case key word is required, significance of each key word should be given in the e-Form 1A. a) Applying for ascertaining the availability of the selected name The promoters are required to make an application to the concerned Registrar of Companies to be submitted electronically to the Ministry of Corporate Affairs on the portal of MCA. An application shall be in e-Form INC-1 as per sec 4(4) read with Rule 9 of Companies (Incorporation) Rules, 2014, duly digitally signed by any one promoter or managing director or director or manager or secretary of the company along with the required fee for ascertaining whether the selected name is available for adoption by the promoters of the proposed company. MCA has prescribed certain rules for name availability so it is advisable to check guidelines for the same before applying for name. Refer Rule-8 of Companies (Incorporation) Rules, 2014./p> b) Approval of the name After receipt of completed application in e-Form INC-1, the Registrar shall intimate whether the proposed name is available for adoption or not. As per section 4(5), maximum time for which name will be available has been prescribed in the law itself under section 4(5). The name will be valid for a period of 60 Days from the date on which the application for Reservation was made.
    Note: The applicant cannot start business or enter into any agreement, contract, etc. in the name of the proposed company until and unless a certificate of registration is issued by the registrar of companies as per the provisions of the Companies Act, 2013 and the rules made there under.
13. Requirement for having DIN
14. Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA)
15. Application for incorporation of a private company

Advantages of private limited company?

Introduction
Private Limited Company can be formed with a minimum of two members; this number can be extended up to two hundred members. A minimum of two directors is needed which can go up to fifteen. This form of business shares many similar traits with partnership firm. A total of two hundred shareholders is acceptable in a private limited company. A properly formulated registration procedure has been mentioned in companies Act. You may ask that why you should opt for Private Limited Company when there is LLP and One Person Company. There are some advantages of Private Limited Company below:

Advantages of Private Limited Company

1. Separate character: A private restricted organization is viewed as a different legitimate substance. It has its very own personality and particularly perceived as a different organization under the law. Additionally, the organization can possess property because of this component under its name. The organization can sue and furthermore it tends to be sued under its own name because of this exceptionally same component.

2. Steadiness because of Limited Liability: Private Limited Company has this element of constrained money related obligation of the considerable number of investors. The liabilities are restricted to their offers as it were. This component secures the individual resources and wage of investors now and again of any money related emergency looked by the organization. Additionally, it gives the organization more freedom of going for broke.

3. Long and congruity of Existence: Private Limited organizations are not influenced by the status of their own with regards to their reality. Demise or powerlessness to proceed if the proprietor does not upset the procedures of the organization.

4. Least necessity of investors and individuals: Only two individuals and two investors are required to fuse a private restricted organization. This gives numerous Entrepreneurs a chance to set up their own organization.

5. Simplicity of Raising Funds: Shareholders permitted are up to two hundred and another two hundred individuals are permitted, this numerous numbers and the notoriety of the private restricted organization makes it simpler to bring capital assets up in contrast with different types of organizations. Subsequently, we can state the extent of development is more prominent when a private constrained organization is fused. Taking obligations from banks and other money related endeavors are very simple as well.

6. Duty Advantages: They cover government obligation on assessable benefits and are exempted from higher individual pay impose rates.

7. Adaptable Relations: A man can go about as an investor, an executive and a representative in the meantime when the private restricted organization is mulled over. They are viewed as dependable as well.wner does not hinder the proceedings of the company.

8. Minimum requirement of shareholders and members: Only two members and two shareholders are required to incorporate a private limited company. This gives many Entrepreneurs an opportunity to set up their own company.

9. Ease of Raising Funds: Shareholders allowed are up to two hundred and another two hundred members are allowed, this many numbers and the reputation of the private limited company makes it easier to raise capital funds in comparison to other forms of companies. Therefore, we can say the scope of expansion is greater when a private limited company is incorporated. Taking debts from banks and other financial ventures are quite easy too.

10. Tax Advantages: They pay tax on taxable profits and are exempted from higher personal income tax rates.

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