Foundation for International Taxation Conference, 2010: Day Three

Day three was dedicated to transfer pricing and the disputes involved in the process. The session saw light with an interesting discussion on the podium among Mr. Mukesh Bhutani, Partner BMR India, Mr. Jerome Libin, Partner, Sutherland Asbill & Brennan, US, Mr. Vijay Mathur, Advisor, PwC and Mr. RN Dash on the Transfer Pricing Dispute Resolution Mechanisms. The question that arose related to the debate between substance and form of the entities involved and which one should be looked into for the purposes of taxation. The panel concluded in unison that undertaking Transfer Pricing issues were fact based and consequently it was a long drawn process. The discussion left the questions of Advance Pricing Agreements and Safe Harbour Rules open.

The technical session on Transfer Pricing Disputes and their Prevention was chaired by Mr. Samir Gandhi, Partner, Deloitte, India. Ms. Caroline Silberztein, Head of Transfer Pricing Unit, OECD, Paris praised India for a number of good quality judgments in Transfer Pricing, led by the Maruti Suzuki case, rendered by the Delhi High Court.

Her presentation was followed by an impressive presentation on the Transfer Pricing issues and the outlook towards them by the courts by Mr. Al Meghji, Partner, Osler, Hoskin & Harcourt, Canada. He highlighted how the process of litigation was transparent, open to challenge while the process undertaken by the competent authority was often opaque. He had argued the case on behalf of the assessee in the recent case of GlaxoSmithKline Inc. v. The Queen, 2010 FCA 201.

The next presentation by Mr. Vispi T. Patel on the Indian Judicial Transfer Pricing Disputes provided an insight into the view of the courts in India on TP disputes. Marketing intangibles was a highly debatable question in his opinion and the Maruti Suzuki case found mention in his speech. He concluded with the note that the TP officers need not be mechanical in their approach and mere quantification analysis was not the relevant criteria, for the protection of the taxpayer.

The Indian Perspective on Advance Pricing Agreements and Safe Harbour Rules was provided by Ms. Anuradha Bhatia, Director of International Tax (Transfer Pricing), Mumbai. She gave her view on the introduction of the safe harbor rules and how the matter is being approached by the authorities. This analysis was consorted by the Ms. Caroline Silberztein.

The final question and answers session saw the presence of the CBDT chairman Mr. SSN Moorthy. The session turned out to be an anti-climax as it did not reveal anything new. Most questions were met with the response that the Government will look or was looking into the matter and would take a call on that basis. The panel, however, conceded that the process of the Dispute Resolution Panel (DRP) needed a relook and vowed to take necessary steps to correct the same.

The post Q&A session was a session to be recorded by UTV and was marked by the presence of Mr. T.P. Ostwal, Mr. SSN Moorthy, Chairman, CBDT, Mr. Ketan Dalal, Mr. Arvind Datar, Mr. Girish Dave, Mr. Nihar Jambusaria. They discussed the policy implications of the Vodafone Judgment, the Maruti Suzuki case and the Linklaters Judgment.

This concluded the 3 day conference and the vote of thanks was given by Prof. Roy Rohatgi, the conference director.

Foundation for International Taxation Conference, 2010: Day Two

This was the most awaited session in the sense that the chairperson for the first session was the tax guru, Mr. Soli Dastur, Senior Advocate, India. The day was dedicated to the Resolution of International Tax Disputes and country experiences in the same.

Mr. Jerome Libin, Partner, Sutherland Asbill & Brennan, US spoke on Advance Pricing Agreements and its forms such as unilateral, bilateral and multilateral. He listed the procedure for solving disputes through the Mutual Agreement Procedure (MAP). He suggested an alternative in the form of a Panel of Experts which would provide non-binding advice to the parties and try to reach a settlement.

Prof. Kees van Raad, Professor of Law, University of Leiden, The Netherlands focalized his presentation on arbitration as a method, to be invoked if the MAP fails. He confessed how arbitration could be used only as a mechanism to expedite the MAP process.

On similar lines, Mr. Dave Hartnett, Head of Tax, Her Majesty’s Revenue & Customs, UK threw light on how Alternative Dispute Mechanisms in Taxation had resulted in speedy dispute resolution and a higher tax collection for his department. In his opinion, the formulation of a litigation settlement strategy for his ‘customers’ – the taxpayer, seemed to be the most effective in resolving disputes.

Next was the erudite dissertation from Mr. Soli Dastur who pinpointed the loopholes in the existing and proposed provisions. He sought answers to questions such as: Whether matters pertaining TDS Deductions can be referred to MAP?; What happens to MAP procedures when the underlying treaty goes away?; If the same issue has been decided by different High Courts laying down different principles, which one would be followed?, inter-alia. Definitely some food for thought for the drafters!

In the session which highlighted the inter-country experience, the view of the judiciary was expatiated by Mr. R. V. Easwar, President, ITAT. This was followed by the New Zealand experience and the US experience where Ms. Carmel Peters, Advice Division, Inland Revenue, NZ and Mr. Marc Levey, Partner, Baker & MacKenzie, US shared their thoughts, respectively. Next, Mr. Porus Kaka, Senior Advocate was called upon to share his experience as a practitioner for 20 years, which he ably fulfilled. He also gave certain suggestions to improve the dispute resolution process in India.

In the following panel session, Ms. Anita Kapur, Director General of Income Tax (Administration), put forth the Governments’ stand on arbitration, and its non-inclusion in the Indian DTAA’s and other related matters. She expressed her view that the arbitration process was highly unfair as it is non-binding on the assessee. Her concern was that the method would also be used as a Damocles sword on the competent authority, which would not be able to function efficaciously under this constant threat. The other panelists included previous speakers who also discussed arbitration as an effective ADR mechanism and concluded the discussion for the day.