Transfer Pricing; Problems in Practical Application in India

Abstract

A great amount of international trade is either between multinational corporations or within a multinational corporation, which is called intra-firm trade. The price used in intra-firm trade is called transfer price. In international transaction, the companies tries to minimise or avoid payment of tax through manipulation of prices. The enterprises may transfer goods to its associated enterprises at prices which are not market determined and not comparable with uncontrolled transaction entered between unrelated entities. The Transfer pricing regulations provide a statutory framework for computation of reasonable, fair and equitable profits and tax. This paper is an attempt to study the practical issues in implementing transfer pricing in India.