NOVEMBER/DE DECEMBER 2001 TPJ that they would be able to shift the burden of proof to the Moreover, one should bear in mind that the documentation taxpayer. The taxpayer will now be able to use the Federal requirements and the burden of proof are only important if Tax Court's decision in tax audits as an effective shield to the taxpayer chooses to rely on German tax courts and not resist the endless demands of the tax authorities for infor- on competent authority or arbitration. In a competent mation and documentation regarding transfer prices authority proceeding, the rules regarding the burden of proof and documentation requirements are of lower For planning of arm's length transfer prices, the taxpayer importance because the competent authorities follow a should, however, not rely on the decision. Apparently, the Ministry of Finance is considering a change of the law in more pragmatic approach and are concentrating on the adjustment itself and not on formalistic aspects. However, modifications will probably include the documentation German tax courts are rarely used to solve transfer pricing equirements and, even more important, a change of the cases because taxpayers are not able to prevent double burden of proof in cases involving a violation of the nev taxation in a tax court setting unless the taxpayer wins 100 law on documentation. Therefore, the position of the tax- per cent. Of course, taxpayers rarely achieve total victory payer might even be worse than before the issuance of the in transfer pricing cases. Even in the Federal Tax Court Federal Tax Court's decis ruling, the court emphasized that the taxpayer's income will be adjusted. INDIA Transfer Pricing rules Dinesh∨erma . INTRODUCTION The Finance Act 2001(hereinafter: the Finance Act) intro. Application of this method requires identification of the duced new transfer pricing legislation which came into orce as from I April 2001. In some of the provisions Incontrolled transaction. Adjustment is made thereafter ntroduced by the Finance Act, reference was made to any difference between the controlled and the uncon additional rules which were to be prescribed by the Cen olled transaction or the enterprises which are party to tral Board of Direct Taxes(hereinafter: the Board ). The such transactions which would materially affect that price he price arrived at after making the adjustments for dif- Board has now issued Notification 34, inserting Rules 10a ferences if any is to be treated as the arms length transfer to 10E and Form 3CEB in Income Tax Rules, 1962, laying pric down rules in respect of statutory provisions included in Sections 92C relating to transfer pricing methods, 92d Resale price method submitted by taxpayers. This article will provide an The price pa first to be identified and for similar goods or accruing to an uncontrolled enterprise services is to be deducted from the price. From this price, I. APPLICATION OF TRANSFER PRICING expenses incurred by the enterprise in connection with the METHODS RULE 10A purchase of goods or services are further to be deducted This rule relates to application of the five transfer pricing ethods referred to in Section 92C of the Income tax Act Officer of the Indian Revenue Service, posted as C oner of Incom tax, The au The guidance provided is concise and limited to a descrip-Documentation,Amsterdam.The ssed in this article are the authors tion of three to fiv length price under each method. The manner of applica- 2,, The Finar the Income tax Act, 1961. For a detailed discussion of these provis/0/n4f Sce- ig in tion of the methods is in consonance with the guidelines Transfer Pricing Regulations", 8 International Transfer Pricing Journal 3 issued by the OECD, although no reference is made to the (200 OECD guidelines in the rules he Income Tax Rules. 1962 as amended from time to time contain rules ious sections of the Income tax Act, 1961. These rules constitute what is alled'subordinate legislation' which is only placed before the parliament and 4.50808(E)of 21 August 200ent @2001 IBFD Publications BV