Circular on conditions relevant to identify development centres engaged in contract R&D services with insignificant risk
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F No. 5001139120.
Government of lndia
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(Foreign Tax and Tax Research-l Division)
New Delhi, the 26ftday of March, 2013
Circular No. 03 /2013
Sub: Circular on conditions relevant to identify development centres engaged incontract R&D services with insignificant risk
It has been broughto the notice of CBDT that there is divergence of views amongst the fieldofficers and taxpayers regarding the functional profile of development centres engaged incontract R&D services for the purposes of transfer pricing audit. Moreover, while at timestaxpayers have been insisting that they are contract R&D service providers with insignificantrisk, the TPOs are treating them as full or significant risk-bearing entities and making transferpricing adjustments accordingly. The issue has been examined in CBDT. lt is herebyclarified that a development centre in India may be treated as a contract R&D serviceprovider with insignificant risk if the following conditions are cumulatively complied with:
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