Safe Harbour provisions in India since its introduction in 2013
had hardly received any positive response for over last three years
as compared to the phenomenal success of Advance Pricing Agreement
(APA). The reasons were very obvious – the safe harbour
margins were very high and not necessarily reflecting the arm's
length scenario and the APA's for similar transactions were
being inked at lower percentages.
Taking a cue from the above, the Central Board of Direct Taxes
(CBDT) vide notification dated 7 June 2017 has revised the Safe
Harbour Rules by relaxing the rates and making few other prominent
changes, which would make it an attractive option, especially for
SMEs.
Generally, safe harbour means circumstances in which Income Tax
Authorities shall accept the transfer price declared by the
taxpayer. The revised safe harbour provisions are applicable from 1
April 2017, i.e. (Financial Year) FY 2016-17 and shall continue to
remain in force for three years (instead
