With a view to provide tax certainty and reduce litigation in
the area of Transfer Pricing, Safe Harbour Rules were introduced in
2013. These rules provided safe harbours for certain transactions
that have historically been subject to intense litigation –
viz. IT/ITES, intra-group financing, R&D, KPO services,
corporate guarantee, etc. The Safe Harbour Rules provide that the
transfer price declared by an eligible taxpayer in respect of a
specified transaction shall be accepted by the Revenue Authorities,
subject to fulfilment of the specified conditions. A taxpayer
entering specified international transactions and meeting
prescribed margin/pricing requirement is eligible to opt for
protection provided under the Safe Harbours Rules.
