Transfer pricing is all about determining the nature, treatment and taxability of intra-group transactions across several geographies. This is done by the determination of arm’s length price of the transaction as per the prescribed transfer pricing methodologies.
Suppose, a Company X purchased goods for Rs. 1000/- and sells it to its associated Company Y in another country amounted for Rs. 2000/-, who in turn sells in the open market for Rs. 3000/-. If Company X had sold it directly in the latter country, it would have made a profit of Rs. 2000/-. But by routing it through company Y, it restricted the profit to Rs. 1000/-. The profit amounting to Rs. 1000/- is, thereby, shifted to country Y. The goods are transferred on a price (transfer price) which is random or controlled (Rs. 2000/-), but not on the market price (Rs. 3000/-).
To protect interests of the revenue, the Income Tax Act, 1961 ("the Act") has framed specific provisions. The basic principle clarified through such provisions is to be considered "arm's length price" for the international transactions.
Every entity associated with an international entity faces the issue of transfer price regulation in India. We being the transfer pricing expert in Delhihelp those entities in determining the correct transfer pricing in India in the form of providing transfer pricing reports for Indian companies within the timeframe adopting complete legal framework.
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