Transfer Pricing Services

The increasing participation of multi-national groups in economic activities in the country has given rise to new and complex issues emerging from transactions entered into between two or more enterprises belonging to the same multi-national group. In order to provide a detailed statutory framework which can lead to computation of reasonable, fair and equitable profits and tax in India, the government has incorporated various acts keeping in mind various aspects in this relation. In the case of multinational enterprises, the Finance Act, 2001 substituted section 92 with a new section and introduced new sections 92A to 92F in the Income-tax Act, relating to computation of income from an international transaction in relation to the arms length price, meaning of associated enterprise, meaning of information and documents by persons entering into international transactions and definitions of certain expressions occurring in the said section.

Arms length price : In accordance with internationally accepted principles, it has been provided that any income arising from an international transaction or an outgoing like expenses or interest from the international transaction between associated enterprises shall be computed having regard to the arms length price, which is the price that would be charged in the transaction if it had been entered into by unrelated parties in similar conditions. The arms length priceshall be determined by one of the methods specified in Section 92C in the manner prescribed in Rules 10A to 10C that have been notified vide S.O. 808 E dated 21.8.2001. Arms length price can be calculated by one of the following specified methods: Comparable uncontrolled price method (CUP Method). Resale price method. Cost plus method. Profit split method or Transactional net margin method.