Domestic Transfer Pricing
-Laws and Practices an Into
This article covers the implications and nuances of domestic transfer pricing provisions and practices followed
Prelude
Transfer pricing regulations was introduced with regard to International transactions (Cross Border Transactions) with associated enterprises in 2001. The Ministry of Finance honoring the judgment of Apex Court in CIT vs. M/S Glaxo Smithkline Asia (P) Ltd. (Special Leave to Appeal (Civil) No(s).18121/2007) expanded the ambit of Transfer pricing to Specified domestic transactions by Finance Bill 2012.
The Honorable Supreme court held that
“The larger issue is whether Transfer Pricing Regulations should be limited to cross-border transactions or whether the Transfer Pricing Regulations to be extended to domestic transactions. In domestic transactions, ordinarily under-invoicing of sales and over-invoicing of expenses will be revenue neutral in nature; except in two circumstances having tax arbitrage such as where one of the related entities is
(i) Loss making or
(ii) Liable to pay tax at a lower rate and the profits are shifted to such entity.
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