Functional Analysis For Every International Transaction, The company needs to undertake a functional analysis as under Diagram 1.53 For every international transaction, Functional, Asset and Risk (FAR) analysis needs to be undertaken to identify the tested party – For Tested Party concept Refer Page <> . First of all, we need to identify the significant … Read more
Documents and Compliances- Documentation required under the Income Tax Act, 1961 Although safeguards such as transfer pricing provisions have been put into place to regulate international transactions between associated enterprises, it will not prove effective if there is no evidence of its implementation. Thus, Documents and Compliances i.e. Documentation required under the Income Tax Act, … Read more
Arm’s Length Price Transfer Pricing Related parties i.e. associated enterprises, often, due to being related, agree upon a price that may be below the market price i.e. the price charged in a transaction between two unrelated parties. This plays against international standards and places other entities at a disadvantage. Furthermore it hampers proper tax liability … Read more
International Transaction – Section 92B of Income Tax Act Transfer Pricing provisions are applicable to determine the arm’s length price of ‘International transaction’ and ‘Specified domestic transactions” between Associated enterprises. Even though domestic transactions are covered in Transfer Pricing , generally Transfer Pricing provisions are mostly considered in the context of international transaction. Thus, it … Read more
Deemed Associated Enterprises -Section 92A (2) There may be certain cases where enterprises may not fulfil the conditions under Section 92A (1) i.e. it would not fall under the definition of ‘Associated Enterprise’. The definition given is quite broad and isn’t sufficient to cover all possible situations to bring all enterprises operating in a similar … Read more
Associated Enterprises Transfer Pricing- Section 92A (1) Transfer Pricing provisions help in determining the price in a transaction between two or more international Associated Enterprises. The provisions of the Income Tax Act, 1961 define the term “Associated Enterprises” and also provide for situations where certain entities may also be defined as a ‘Deemed Associated Enterprise’. … Read more
Computation of Income having regard to the ALP- Section 92 Transfer Pricing provisions have ushered in a new era of regulating cross border transactions between Associated enterprises and addressing issues such as tax evasion, base erosion, etc. The Arm’s Length Price Principle helps in determining the price of a transaction between two unrelated parties. However … Read more
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Evolution of Transfer Pricing in India Before the amendments introduced in the Financial Act 2001, cross border transactions between MNEs were unregulated and sufficient taxation laws were not in place to curb unscrupulous acts such as tax evasion and ease conducting of international transactions. The Evolution of Transfer Pricing in India pre and post the … Read more
What is Transfer Price ? Although we have had a brief glimpse of the principle of transfer pricing, the question still remains: What is Transfer Pricing? MNEs with their Associated Enterprises enter into transactions at a price that are generally lower than the actual market price. Furthermore, MNEs set up business plans in order to … Read more
Meaning of Transfer Price Economies around the world in order to encourage healthy competition and inflow of foreign funds have liberalised their regulations and have provided environments for international transactions. The quintessence of each transaction: Price. The price at which international transactions take place is called Transfer Price. Let’s take a look to better understand … Read more