Foreign transactions and specified domestic transactions between associated enterprises (AE) are subject to transfer pricing provisions.

International transactions refer to transactions involving one of the following activities between two or more AEs:

1. Sale, purchase or lease of property that is tangible or intangible;
2. Provision of facilities or deals on cost-sharing;
3. Capital lending or borrowing;
4. A corporate restructuring or reorganization arrangement with a related enterprise, irrespective of its effect on benefit, revenue, losses or assets and/or assets.
5. Any other transaction relating to the gains, expenses , losses, or properties of such undertakings.

A study on transfer pricing explores the pricing of transactions between two or more associates involved. Through the implementation and recording of different test methods, it is determined if transactions are carried out under market conditions and are subject to inspection by the IRS and other tax authorities.

As a way to preserve its tax base, the Indian government relies on transfer pricing. Latest case law developments reflect on this protectionism. India exempts wholly domestic companies and focuses on foreign companies to better enforce its tax base issues.... A centralised return mechanism is not used by India.

In transactions between two linked (associated) parties within the same taxable jurisdiction is known as domestic transfer pricing.

Current provisions under Section 92BA of the Income Tax Act , 1961, require an assessment to comply with the provisions on transfer pricing if the aggregate amount of Defined Domestic Transactions (SDT) during an assessment year exceeds INR 20 crore.

The following sections are the Important sections related to transfer pricing as per Income Tax Act, 1961

• Section 92 of the Income Tax Act, 1961
• Section 92B of the Income Tax Act, 1961
• Section 92A of the Income Tax Act, 1961
• Section 92E – Audit Under Transfer Pricing

Transfer pricing methods are:

1. Comparable uncontrolled price (CUP) method. The CUP method is grouped (as opposed to the transaction benefit method) as a conventional transaction method by the OECD
2. Resale price method.
3. Cost-plus method.
4. Transaction net margin method (TN MM)
5. Transaction profit split method.

We AVS & ASSOCIATES Chartered Accountants has well-structure plan for documentation and certification/audit procedure under Transfer Pricing Law in India. Our services include:
1. Consultancy
2. Legal Opinion
3. Documentation
4. TP Audit
5. Computation of Arm Length Price