Management Fees and Transfer Pricing Audit

The payment of management fees falls under the intragroup services that are being availed by the associated enterprises. Here I am going to discuss the striking point for the transfer pricing officer w. r. t. this transaction while doing the TP Audit. 

In one of the cases the assessee had been showing the payment of management fees to its associated Enterprises outside country and for three years in continuation the transfer pricing officer made an adjustment on account of payment of management fees which was determined at a basic minimum as it was discussed by TPO in the order that such huge amount of payment fees is not required to be made. Further it was ascertained by the transfer pricing officer that this payment of management fees falls under the category of shareholder activity. 

Subsequently for two assessment years it was seen that there was no transfer pricing reference made in the case under section 92CA(1). During the course of transfer pricing audit it was noticed that the assessee has shown various expenditure heads in its form 3CEB. These expenditure heads appeared to be dubious as they all fell into the category of intra group services. Hence in order to investigate this transaction further form 3CEB was called for for the previous five assessment years and the transactions reflected in the year under consideration were compared with the transactions reflected in the previous five assessment years. The detailed investigation revealed that the assessee in order to avoid the TP adjustment under the head payment of management fees had shown this excess payments under various different heads falling into the category of intra group services. Interestingly payment of management fees was not shown in the year under consideration. So the assessee had cleverly disguised the payment of management fees into various different other kinds of payments made in the year which were all new transactions occurring for the first time. The important point to note here is that there has been no significant change in the FAR analysis of the assessee. 

Hence it is important for the transfer pricing officers to keep their eyes and ears open while concluding the transfer pricing audits. 

Cheers!

Tryst with Transfer Pricing

Hello everyone

Hope you all are Leading a focused life with clear written goals. They are so very important in bringing clarity in what you are doing and what we plan to do. I just thought of penning my thoughts down as I am at such an important juncture of my life wherein I have to take some very important decisions which would mark a new beginning and Pave a way for my future. Seven years in Mumbai have come to an end. 

This is my second year in transfer pricing as a transfer pricing officer in Mumbai. I have thoroughly enjoyed my tenure the first year has gone by and the second year has begun with some new experiments some new learning some new thoughts. Transfer pricing as a subject is quite technical but after having experienced it and practised it for one year I realised the fact that it is more of a common sense. Nevertheless there is no substitute for a thorough understanding of the subject as they say that knowledge is power and the knowledge of the subject brings a lot of power in the forms of confidence greater understanding and analytical bent of mind. 

Transfer pricing basically pertains to determination of arms length price of the transactions between the related parties. Herein, we try to compare the transactions between two related parties with the transactions between the AE and non-AE And then try to determine whether the price charged by the assessee from the AE is at arm’s-length or not. Then we have certain methods prescribed in the income tax act and we have the comparability analysis the statue makes it very clear As to which method is to be applied when. The income tax rules becomes very significant here as a detailed analysis of the methods prescribed are delineated along with the use of multiple year data and examples thereof. 

The transfer pricing was introduced in India by the Finance act 2001 and since then we are almost about to come to an end of the second decade. The subject has evolved and so have the rules. I have met so many chartered accountants during my one-year tenure in this field and I have heard them saying that transfer pricing is of no use because it is based on estimation. But my dear friends have forgotten that with the rise of globalisation the companies are having more number of international transactions between them there are so many multinational corporations coming up and they have their own subsidiaries and related parties set up in different countries for ease of business. Here comes the role of transfer pricing to investigate whether there is any evasion of tax or shifting of profits from High tax jurisdiction to low tax jurisdiction on account of related party transactions. In view of this how can the role of transfer pricing become insignificant in the new world order. 

I am open to queries on the fundamentals of transfer pricing and its usage. 

Cheers!

Weight Loss Journey

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Greetings!

Its been quite sometime that i have been struggling to loose my weight. Being so aware about the fitness, i couldnt see my weight increasing. Feb 2017, i had touched 89Kgs! i was looking bulky and fat and had very low energy levels. Have a look:

82 Kgs

77 Kgs

I made it a point to loose weight and do something about my body. That time, i joined Anjali Mukherjee's course in Mumbai and it was bang on ! Thanks to them. In the very first week of de-toxification, i lost 4 kgs! And the journey continued. In a span of 2 months, with all the sheer hard work, I had touched 79.3 kgs! But then I got complacent. I have charm for bourbon biscuits and sweets. I started eating them and stopped attending my scheduled appointments. That was my complacent attitude that hit me hard and within 2 months I had touched 82 kgs.

Its very important to know what you want. I did everything to loose weight but never focused on weight maintenance. And since the results were showing so I started cheating in between and had a good time eating lot of sweets.

Since then, its been more than a year that I had been struggling to come below 82kgs. Some friends of mine say that I am not able to loose because my bones weigh too much. I kept exercising but had no control over my food habits. Weighing 82 kgs for 1 year was so frustrating. That was the time I joined Anjali Mukherjee’s course again. I thought that I need a certain amount of monitoring to just keep me on track. And here I am ! I joined on 11^th July at 82.2 kgs and today on 11^th Aug, I weigh 76.8 kgs !! Wooooof !!

Yes, this time the determination is even higher and I have decided to take sugar intake levels to zero. Fitness is a mind game. It’s a daily ritual. Cheating once in a while is fine. I have had certain realisations after achieving this feat:

1.     I feel more energetic

2.    I am more organized

3.    I remember things that are to be done

4.    I have gained stamina for running (I run 10 kms 3 times a week now!)

5.    Clothes look great on you once you feel fit, no matter what you wear

6.    With this sense of achievement, nothing looks impossible

7.    In others areas of life also, you feel like an achiever and a leader

8.    I have become more active and mindful

My suggestion to folks who are trying to loose weight:

1.     Be regular

2.    Dieting should not be a punishment

3.   Whenever you feel that you are the chosen one to be deprived of all the sweets, think about the larger goal

4.    Exercise along with diet is must. Diet alone may not produce great results (avoid weight training during your weight loss journey)

5.    Following your plan should become your obsession

6.    You will get lot of time in your life to eat those creamy biscuits

7.    Mean business, this is no joke

The story doesn’t end here. Will write a sequel once I achieve my desired weight between 70-73 kgs.

Till then, Best of Luck !

Weight Loss

"Lack of Time" is an excuse. One of the most common barriers to weight loss is the belief that you don't have enough time. One study found that 41% of people said 'lack of time' was the reason that they didn't eat better and 73% of people said they didn't exercise because their schedules were too busy. The bottom line is that if you want to lose weight, you have to find a way to make time for healthy activity. 

There is no second chance to create the first impression.. And did you know Body posture speaks more than anything else. Expensive clothes have no value if your posture is bad. Exercise Regularly to get a confident and smart posture and an impressive body language!

Photoshop hands-on

During my tenure as Deputy Director of Income Tax in Intelligence and Criminal Investigation, I happened to design an advertisement for the Income Tax Department on a new return that needs to be filed by the eligible entities. I am sharing the image here:

This advertisement was really liked by my seniors and we decided to take its print out on a flex. This was then installed in all the Income Tax Buildings in Mumbai and also all across the cities in the Country. This was in larger public interest and was educative in nature.

Dream

A person may have many goals and dreams in life which he/she wants to achieve. Dreams are not only meant to make one grow richer or bigger in life. Most importantly they are meant to make a person feel content. You feel more confident! You feel accomplished! This confidence gets reflected in every sphere of your life, be it personal or social. But as they say, Reaching the topmost position in a hierarchy is not important, maintaining yourself in that position for a longer period of time with your conduct is what matters the most! 

My Sociology professor at Delhi always used to tell us that, chaand ka sochoge toh aasman tak pahunchoge, agar socha hi asmaan tak toh kahan tak jaoge ?  I think i need not say anything else. This says it all. 

Get inspired. Get going! 

Intelligence and Criminal Investigation

Hello friends,

I am back to blogging! Yes, this happening after a very long time. My current stint as Deputy Director of Investigation (DDIT) in Intelligence and Criminal Investigation has been very enriching. Mumbai has given me lot of exposure and immense experience of variety of cases which I can cherish and boast for life. Most memorable being an action on a Credit Cooperative society detecting a cash deposit of more than 2000 cr! Special Projects also excites me a lot. Most importantly, I have been able to follow my passion for photography and creativity. We conducted an All India Conference at Madh Island, Mumbai where I completely made use of my NIKON D750 (24-120mm). I took the stills as well as videos and then created a movie with all the special effects and tag lines which everyone liked and appreciated. More than anything else, I felt satisfied and content. The movie which I created is very close to my heart.

These days, we are conducting OUTREACH PROGRAMMES – Workshop on uploading of Statement of Financial Transactions u/s 285BA of the Income Tax Act, 1961. The presentations have all gone well. This again is my area of interest (i.e. giving presentations) which I love doing and which i am able to pursue here. Sharing some of the pics here.

P.S. : Keep pursuing your hobbies along with your work. I consider myself lucky that in my work, I have been able to pursue them.