Vision: Journal of Indian Taxation
Year : 2023, Volume : 10, Issue : 2
First page : ( 133) Last page : ( 139)
Print ISSN : 2347-4475. Online ISSN : 2395-2571.
Article DOI : 10.17492/jpi.vision.v10i2.1022308

Time-travel in the era of taxation: The story of how the Indian Tax courts retroactively opted to treat two independent parties as associated entities

Phadke Geetanjali

Legal Counsel, Department of International Tax and Transfer Pricing, CARA Societe d'Avocats, Lyon, France, (E-mail: geetanjali.phadke@cara-avocats.com)

Online Published on 2 February, 2024.

Abstract

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.

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Keywords

OECD, Transfer Pricing, Transfer Pricing Methodology, International Taxation, Tax Administrations.

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