The Central Board of Direct Taxes (CBDT) signed first unilateral rollback advance pricing agreement (APA) on Monday, four months after the rollback norms were notified in March this year. According to sources, the rollback deal was signed with a US firm for nine years, which includes protection against litigation for the past four years as well. “This will be followed by many more in the coming months with an aim to make tax regime more investor friendly,” said a government official. “With the conclusion of this APA, it will become clear to multinational companies (MNCs) in India that they can achieve certainty around transfer- pricing for a nine year period,” said S P Singh, senior director, Deloitte in India. He added certainty in tax law reduces compliance costs and makes tax regime investor- friendly. “APAs provide tax certainty and improve investment climate in the country; this one will give a boost to the Indian economy,” he noted. With this agreement, many international companies are likely to adopt the APA route to reduce litigation, Singh added. According to sources, 3040 APAs, mostly rollback, are expected to be signed by the year- end. APA is an ahead- of- time agreement between a taxpayer and a taxing authority on an appropriate transfer pricing methodology for some set of transactions over a fixed period of time. While under the APA introduced in 2012, companies could enter into an agreement with tax authorities for the next five years, the roll- back norms give protection for the previous four years as well – a total of nine years. Finance minister Arun Jaitley had announced the roll- back provision in his maiden Budget in July last year, where the agreement entered into for future transactions might also be applied to transactions of the previous four years. So far, 13 unilateral APAs and one bilateral APA have been signed. Unilateral APAs refer to the signing of agreement with the Indian tax authorities and an MNC, while bilateral APAs also involve the government of the country where an overseas company is located. Rollback APAs are in sync with forward looking APAs. If forward looking APAs are unilateral, rollback APA would also be unilateral and so on. Transfer pricing has been the bone of contention between the tax department and MNCs as the two sides have divergent views on the pricing structure of the Indian subsidiaries. The issue of transfer pricing has generated much heat in India involving MNCs operating here such as Cairn, WNS and Nokia. To resolve disputes, the government has been easing rules for MNCs. Earlier, it had decided not to appeal against aBombay High Court order, giving relief to Vodafone over aRs. 3,200 crore tax dispute in a case relating to share transfer to the parent company. CBDT had also asked field officials to apply the spirit of the ruling in similar cases. – www.business-standard.com