“These claims are processed in accordance with the provisions of the Income Tax Act and the current I-T rules. The inclusion of the backtracking system in these bilateral APAs would also be subject to current regulations in Korea,” CBDT said. In this context, CBDT has received requests from subjects regarding the availability of backtracking rules for bilateral APA applications for the period 2017 to 2018. “Article 9, paragraph 2 of the revised India-Korea DBAA provides that taxpayers in both countries use the Mutual Agreement (MAP) procedure for transfer pricing disputes and for bilateral APA cases for the APA period from 2017-2018,” CBDT said. On May 18, 2015, a revised DBAA was signed between India and Korea to avoid double taxation and avoid income tax evasion and came into force on September 12, 2016. Article 9, paragraph 2 of the revised India-Korea DBAA provides for taxpayers in both countries to seek reciprocal agreement in the event of a transfer price dispute and request bilateral APAas for the 2017-2018 APP period. As a major boost for multinationals based in Korea and India, the Central Direct Taxes Council (CBDT) has specified that the withdrawal regime under the Bilateral Supply Pricing Agreement (APA) under the India Double Taxation Insurance Agreement (DTAA) will be available and that international transactions with associated companies in Korea from the APA period from the 2017-18 financial year Available. This is consistent with the government`s agenda to make India easier to do business and to build the confidence of Korean companies in the resolution of transfer pricing disputes. The retroactive applicability of the APA would mean that such cases should not go through the internal process system, which can be a long-term process.
Overall, the government has enabled Korean companies operating in India to effectively deal with transfer pricing disputes by granting the withdrawal regime. The APA provisions were incorporated into the Information Technology Act in 2012 and introduced the rules for withdrawing dispute resolution measures in 2014. The APA allows taxpayers and tax authorities to agree on the length price of a transaction with related companies.