Western Regional Chapter of International Fiscal Association –Indian Branch Transfer Pricing Problems, Strategies and Documentation
Recent International Case Law on Transfer Pricing
by Nishith Desai
The Taj Mahal Hotel, Mumbai January 21st & 22nd 2002
Nishith Desai Associates
I. II. Introduction History
III. Select International cases US Cases 1. 2. 3. Compaq Computer Corporation V. Commissioner DHL Corporation and Subsidiaries V. Commissioner Texaco Inc. and Subsidiaries V. Commissioner of Internal Revenue 4. Exxon Corporation and Affiliated Companies, et al V. Commissioner 5. Central De Gas Chihuahua, S.A. V. Commissioner of Internal Revenue 6. Sunstrand Corporation and Subsidiaries V. Commissioner of Internal Revenue 7. E. I. Dupont De Nemours and Company V. the United States
Australian case 1. San Remo Macaroni Co Pty Ltd V. CMR of Taxation
UK cases 1. 2. Rochester (UK) Limited and another V. Pickin Glaxo Group Ltd and Others V. Inland Revenue Commissioners
Canadian case 1. IV. Smithkline Beecham Animal Health Inc.
Nishith Desai Associates
SELECT CASES ON TRANSFER PRICING -by Nishith Desai*
timulated by the technological advancements, trade has not remained restricted to geographical limitations. It has enhanced its scope to encompass the resources from around the world, giving rise to various issues from commercial, business and tax perspective. These trade transactions have predictably caused and continue to cause large amounts of transfer of tangibles and intangibles, all across the globe. Following this, it became essential for governments all over the world to bring under their tax net, the transactions resulting from the transfer of such resources. Thus, restricted regional economies have been transformed to global economies and now are fast moving to the ‘One World – One Economy’ concept. Consequentially, transfer pricing, resulting from these numerous transactions, has become the ‘buzz’ word moving in the corporate circles. Multinational corporations are expanding their activities on a large scale through the incorporation of subsidiaries in various jurisdictions. Democratization of information, finance provisions and communication technology enables smaller companies, firms and even individuals to become global players. Intercompany transfer of goods and services are increasing substantially in the current era of globalisation. These dealings with their subsidiaries have attracted the attention of the tax authorities since they involve transactions between related parties and associated enterprises. Thus, transfer pricing is one of the most crucial areas affecting the financial statements and taxation of the MNCs. Transfer pricing also plays a critical role in case of double taxation avoidance agreements between countries. Thus, most of the MNCs are anticipating the influence of transfer pricing on their businesses to an enormous degree. Though transfer pricing regulations have been around for some time now, there still exists a confusion in the minds of the company officials on various aspects like documentation, local guidelines, methods to be used, etc. It is pertinent to note that in dealing with transfer pricing, various issues involving economic, legal and commercial implications have to be borne in mind. Before addressing the issue of the use of methods of transfer pricing, it is imperative to take the assistance of economists, legal counsels, accountants, etc. Economist play a very important as they are important in the analysis of market trends, movement in prices in the markets, returns to be accorded to *
Mr. Nishith Desai is the founder of the firm Nishith Desai Associates** (www.nishithdesai.com), Legal & Tax Counseling Worldwide. He is an international lawyer, researcher, author and a lecturer. His practice areas include International Taxation and Transfer Pricing, Information Technology & e-commerce...
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