Section 168: advance pricing agreement

What an advance pricing agreement can cover

The Board, with Central Government approval, may enter into an agreement determining, or specifying the manner of determining:

• the arm's length price in relation to an international transaction to be entered into by that person, and
• the income referred to in Section 9(2), as is reasonably attributable to the operations carried out in India by or on behalf of a non-resident person.

Methods used

The manner of determination may include the methods referred to in Section 165(1) (for arm's length price) or the methods provided by rules made under the Act (for attributable income), with such adjustments or variations as necessary.

Irrespective of anything contained in Section 165 or 166, once an APA has been entered into, the arm's length price of the covered international transaction or the attributable income under Section 9(2) is determined strictly as per the agreement.

Validity, binding effect and roll-back

Agreement void ab initio

The Board, with Central Government approval, may by order declare an agreement void ab initio if it finds the agreement was obtained by fraud or misrepresentation of facts.

Once an agreement is declared void ab initio, all provisions of the Act apply as if the agreement had never been entered into. The period from the date of the agreement to the date of the void-ab-initio order is excluded when computing any limitation period under the Act, and if the remaining limitation period after that exclusion is less than sixty days, it is extended to sixty days.

Applications and pending proceedings

Where a person applies to enter into an agreement, proceedings in that person's case are deemed pending for the purposes of the Act until the agreement is entered into, or the proceedings are closed, as may be prescribed.

The Board may prescribe a scheme specifying the manner, form, procedure and other matters for advance pricing agreements.

Frequently asked questions