In a stunning move, the Central Board of Direct Taxes (CBDT) has announced transfers of over 360 commissioners of income tax across India.

The transfers affect nearly half of the total Indian Revenue Service (IRS) officers holding the rank of commissioner.

What has startled the taxmen’s ranks is the near en masse transfer of a dozen-odd commissioners who were holding charge of the international tax and transfer pricing wing across the country.

These are segments where cases of multinationals such as Vodafone, the world’s biggest mobile phone operator, and Shell, the oil and gas giant, are ongoing.

Three out of four commissioners each in Mumbai and New Delhi, two in Chennai, and one each in Ahmedabad and Kolkata who handled international tax and transfer pricing have been shunted out.

While a few had finished their terms and were expected to be moved out of the international tax wing, the sweeping nature of the transfers, especially in Mumbai and Delhi, has caught many unawares and also set tongues wagging on the message being sent out by the board.

There is great speculation that the CBDT may have wanted a fresh team of IRS officers to handle the increasing number of controversial tax cases involving multinational companies.

Transfer pricing adjustments itself in the previous assessment cycle were in the range of $12 billion (Rs68,000 crore), including high profile cases like Shell ($3 billion or Rs17,000 crore adjustment), Vodafone etc.

A senior IRS officer told dna that the CBDT was also unhappy with the ‘glamour’ associated with the subjects of international tax and transfer pricing and the growing feeling within IRS circles that international tax had become a prestigious/plum posting.
Therefore, these transfers are CBDT’s message to all commissioners that international tax is “not a separate island that can’t be touched”.

Tax litigations in India involving multinationals have become a hot topic of debate at international conferences and even finance minister P Chidambaram has had to face questions on this score during his recent roadshows abroad to attract foreign investment.

Ketan Dalal, joint tax head of PricewaterhouseCoopers, the audit firm, said the tax department must move away from a revenue-collection oriented approach while dealing with multinationals.

“Both the global and Indian economic situation is very stressed. India badly needs foreign investment, both direct and portfolio, and the reality is that FDI has reduced significantly and portfolio is volatile.

“The alarming rupee depreciation is a testament to this reality. This context and need for India to align with global practices, as opposed to revenue targets, should be the logical approach.”

Tax on glamour
The CBDT was unhappy with the ‘glamour’ associated with the subjects of international tax and transfer pricing and the growing feeling within IRS circles that international tax had become a prestigious/plum posting, a senior IRS officer told dna.