Draft Safe Harbour Rules - How 'safe' is the harbour?

On Wednesday, August 14, CBDT released the much awaited draft Safe Harbour Rules, which are aimed at reducing Transfer Pricing litigation & alleviating uncertainty, while ensuring taxation of reasonable profits in India. CBDT has called for comments on these Rules by August 26, 2013.


Will the proposed rules really achieve the coveted objective of reducing TP litigation? Are the margins and threshold for application of Safe Harbour Rules reasonable enough to encourage taxpayers to opt for them? Do they give too much discretion to the tax authorities while judging the eligibility of international transactions /assessees for their application?