A communication issued by the Central Board of Direct Taxes, dated 29 November 2019.
The Board's third annual report on its advance pricing agreement programme, covering the financial year 2018-19. An agreement under sections 92CC and 92CD fixes the arm's length price, or the manner of determining it, for an international transaction in advance, for years ahead and with a rollback to earlier years. The report sets out how many agreements were signed, with which countries and sectors, and how long they took to conclude.
This one does not fall neatly into the Board's usual classes — it is a letter, a memorandum, a consultation paper or something else the department has published in this collection. What it is, and what weight it carries, is set out below.
The report records that 52 advance pricing agreements were entered into during the financial year 2018-19, taking the cumulative figure to 271 agreements signed up to 31st March, 2019 — 240 unilateral and 31 bilateral. Between them the agreements give certainty for 1,779 assessment years, counting rollback periods. The service sector dominates the unilateral agreements, information technology at about 27 per cent and healthcare and hygiene at about 15 per cent, and the bilateral agreements are similarly weighted towards information technology services. Unilateral applications involved counterparties in 54 countries, most often the United States, the United Kingdom and Singapore, and the bilateral applications are concentrated on the United States, the United Kingdom and Japan. Average processing time is given as 32.5 months for a unilateral agreement and 44.32 months for a bilateral one.
Transfer pricing was the largest single source of direct tax litigation in India, and an advance pricing agreement is the department's answer to it: settle the price first and the dispute never arises. A programme of that kind depends on the confidence of taxpayers who must commit years to the process before they see anything. The Board publishes an annual report so that the numbers are visible to those deciding whether to apply.
A report, not an order. It creates no rights and imposes no obligations, and it settles nothing about any particular agreement, which is governed by sections 92CC and 92CD and by its own terms. The department is not bound by anything in it in a later assessment, and neither is a court or the Tribunal. Its value is as a record of what the programme has actually done.
Released on 29th November, 2019, covering the financial year 2018-19, with cumulative figures up to 31st March, 2019.
The averages matter more than the totals. An average of 32.5 months to a unilateral agreement and over 44 months to a bilateral one is the practical answer to a client asking how long the process takes. Remember also that the rollback under section 92CD reaches back four years, so a signed agreement can give certainty across a much longer span than its own term.
An APA is a mechanism to resolve transfer pricing issues in advance, i.e., before the cross-border related party transaction actually takes place or, at least, before a dispute arises in respect of such cross-border transaction.
— the Central Board of Direct Taxes, communication, 29 November 2019. Read it in the department’s own PDF.
| Under the Income-tax Act, 1961 | Now, in the Income-tax Act, 2025 |
|---|---|
| section 92CC | section 168 |
| section 92CD | section 169 |
What here is the Board’s and what is ours. The document is the Central Board of Direct Taxes’ own. Its date and the words quoted above are reproduced from the Board’s own PDF, which is here. Everything else on this page is ours: the plain-English account of what the document is and what it does, the reading of which provision it turns on, the note on what to watch, and the choice of cases. Where our account and the document part, the document governs.
An order of the Board binds the department, not you and not a court. The Board writes to its own officers. An assessee may hold the department to an order or an instruction that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves. This is the most common mistake made with this material, and it is worth making twice: a direction of the Board is not a section of the Act.
We did not read all of it. The department’s file returned only part of this document to us, so what is written above is written from the part we could read. Open the PDF before you rely on it.
What we could not settle. The report is a long document and was read in summary rather than page by page. The detailed tables, the industry and country breakdowns beyond the leading entries, and the annexures were not transcribed. No file number is printed on it.