Transfer pricing: MNCs receive I-T notices

Transfer pricing adjustments have been surging in key Indian cities. At a time when the Finance Minister P Chidambaram has been telling the tax department to treat tax payers like clients and themselves as service providers, a lot of litigation in the area of transfer pricing especially where multi-national companies (MNCs) are involved is taking place, reports CNBC-TV18's Aakansha Sethi.

Also read: I-T dept targets 27 cos on transfer pricing issue in FY13 According to data collected from all tax departments across India, in 2012-2013 the total transfer pricing adjustment stood at Rs 70,000 crore, which nearly doubled from the year before. Mumbai, among other cities, leads the pack. However, cities such as Bangalore and Hyderabad, which have a concentration of the IT industry and financial services, have also seen high amounts of transfer pricing adjustments at over Rs 6,000 crore each. The companies that received these notices belong to various sectors. There are over a thousand companies to which notices have been sent in the last year itself. A lot of financial services companies – ICICI Bank, Goldman Sachs, Credit Suisse, and CLSA are a part of it. Apart from that, FMCG companies such as Cadbury, Johnson and Johnson and a lot of auto companies such as Mahindra and Mahindra (M&M), Fiat; several Essar Group companies like Essar Steel and Tata Group companies such as Tata Realty are included too. Chidambaram has setup a panel headed by Shome, which will meet every Wednesday, to address tax issues. Shome told CNBC-TV18 that transfer pricing is one of the key areas which are going to be addressed. It remains to be seen if this cash cow that is being milked by the government, will take a back seat. Across the board in the finance ministry, the tax department has seen a change. So, it remains to be seen how this will be looked at, in the year going forward.