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Transfer Pricing as Tax Avoidance: Considering the interactive application of Sections 34D and 33

Transfer pricing and general anti-avoidance: two of the most feared weapons in the Revenue’s arsenal. Most scenarios on the tax planning spectrum may be addressed and countered by the Revenue’s exercise of either provision. But what of fact patterns which fall under the possible ambit of both provisions? How would the two interact? More pertinently, what are the considerations which a taxpayer should take into account when faced with the uncertain prospect of having to defend against either or both provision(s)?

This topic is a technical and narrow one on which there has been precious little guidance from either the courts or the Revenue. As such, the analysis must begin from first principles – the proper statutory interpretation of sections 34D and 33 of the Income Tax Act. A comparative analysis reveals there to be differences between the two provisions along the dimensions of intitation power, subject, trigger, analytic (i.e. the operative test), actions and exceptions (i.e. taxpayer’s defence). 

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