More Companies Turn to Dispute Resolution Panel

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May 10 – More local and multinational companies in India are choosing to apply issues related to cross-border taxation to the newly established dispute resolution panel (DRP) rather than the conventional channels of appeal.

Choosing the DRP route has the benefit of limiting the tax department from recovering tax pending a DRP verdict. Moreover, the DRP settles cross-border taxation issues within nine months of filing compared to taking the case to the office of the commissioner that may take up to five years before an appeal is released. “Around Rs 10,000 crore has been locked up in disputes because of the rule that binds the department to wait until DRP gives its verdict,” a tax official told The Economic Times.

The DRP’s scope includes transfer pricing, cross-border taxation issues like permanent establishment (PE), attribution of profits to a PE, characterization of income and income computation method.

It aims to conclude tax disputes faster and more effectively. The process is applicable to both local and foreign companies in cases wherein the revenue officer intends to adjust the transfer price of a transaction between a local company and its related non-resident enterprise.

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