The ITAT (Income Tax Appellate Tribunal) in India has ordered a reassessment of AstraZeneca’s Transfer Pricing issues, which could result in an estimated tax benefit of Rs. 35 million for the pharma company.
Background
AstraZeneca had faced tax adjustments due to discrepancies with the tax administration regarding applying its Transfer Pricing policies, which determined the values of related-party transactions. The company appealed these adjustments before the ITAT, arguing that it should operate under international guidelines and market value.
ITAT Decision
The ITAT has referred the case to the tax authorities for further assessment, indicating that all relevant facts and circumstances should be considered. Due to this decision, AstraZeneca could receive significant tax relief if its Transfer Pricing policies are appropriate.
Implications for Multinationals
This case underscores the documentation supporting local regulations and international Transfer Pricing guidelines established by the OECD. Multinational companies should ensure that their policies reflect market value and are supported by detailed analysis to avoid tax adjustments and penalties.
Conclusion
The ITAT decision in the AstraZeneca case highlights the need for careful Transfer Pricing management and the importance of preparation in supporting policies to tax authorities. A well-documented strategy can result in significant tax benefits and mitigation of audit and litigation risks.
