Though the finance ministry has suggested the taxman may still apply the profit-split method (PSM) to local R&D centres of MNCs, albeit in a much more restricted form, the Rangachary committee on this opposed it, saying it is “impracticable to apply PSM”. On Sunday, the CBDT had clarified PSM could be used if the R&D centre was, for instance, sharing risks but Rangachary has said that since it is difficult to ascertain sharing of risks, it is best not to use PSM.

The finance ministry is expected to come out with its view on the report soon.