Transfer Pricing in India: A Comprehensive overview with key case studies

Income Tax

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10th January, 2023

Transfer pricing refers to the pricing of goods and services traded between related parties, such as subsidiaries of the same multinational corporation. It is an important aspect of international business, as it can significantly impact a company's profitability and tax liability. In recent years, transfer pricing has come under scrutiny by governments worldwide, as it can be used as a means of tax avoidance or evasion. In India, transfer pricing is regulated by the Income Tax Act 1961 and the rules prescribed thereunder. The Central Board of Direct Taxes (CBDT) is responsible for enforcing India's transfer pricing regulations.

Hero Moto Corp Vs. DCIT, Delhi [2020] 117 taxmann.com 101 (Delhi - Trib.) In this case, the Delhi Tribunal considered the issue of whether the cost plus method was the most appropriate transfer pricing method for determining the arm's length price of a transaction involving the procurement of raw materials by the taxpayer, Hero Moto Corp. The taxpayer argued that the cost-plus method was the most appropriate method, as it took into account the specific circumstances of the transaction and the taxpayer's contribution to the value of the raw materials.

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