Govt notify circulars on taxation of development centres

NEW DELHI, INDIA: The Government has approved the issue of circulars on identification of contract R&D service provider with insignificant risk and on application of profit split method based on the recommendation of the Rangachary Committee.

These circulars will help in providing certainty to the taxpayer on issues relating to transfer pricing of development centre, said a press release.

On 14th September, 2012, the Rangachary Committee had submitted its report on "Taxation of Development Centres and IT Sector", where it had made recommendations regarding the parameters to identity contract R&D services provider with insignificant risk, application of profit split method.

The recommendation also included the condition for eligibility to claim deduction under section 10A, 10AA and 10B of Income Tax Act, 1961.

After the examination of Committee's recommendations, the the Central Board of Direct Taxes (CBDT) had issued a circular on issues related to the export of computer software under Sections 10A, 10AA, 10B of the Act, according to a government release.

As per CBDT, these circulars will help in providing certainty to the taxpayer on issues pertaining to the transfer pricing of development centre. These details can be found on the website- www.incometaxindia.gov.in