Q. What is transfer pricing?
Transfer pricing refers to the setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of property (including intangible property).
Q. Is it mandatory?
Yes, as per the Section 92 to 92F of the Income-tax Act 1961.
The Finance Act, 2001 substituted Section 92 of the Income-tax Act, 1961 by new sections 92 and 92A to 92F. These new provisions require commercial outcomes arising from international transactions between associated enterprises to be consistent with the arm’s length principle.
The calculation of arm’s length price has to be done by using the most appropriate method. The Income-tax Act mandates the company that ALP is to be calculated using one of the following methods:
- Comparable Uncontrolled Price method (“CUP”);
- Resale Price Method (“RPM”);
- Cost Plus Method (“CPLM”);
- Profit Split Method (“PSM”);
- Transactional Net Margin Method (“TNMM”)
Q. Why consult with us?
We provide full strength professional services on activities relating to transfer pricing as according to ALP pronounced by the prescribed authorities in this respect. We assist you in the following aspects of transfer pricing:
- Planning, review and evaluation of transfer pricing mechanism.
- Adherences and compliance of transfer pricing regulations and provisions as according with present legislations.
- Representation before the competent authorities.
- Expert tax planning with a flexible approach on implementation of methodologies of transfer pricing.
- Consultancy services on potential threats interrelated with the existing legislation and the policies of the organization to avoid taxation and legal consequences.
The required documentation is as prescribed by the Rule 10D of the Income-tax Act 1961.
The document emphasizes on the analysis of the following aspects:
- Functional analysis
- Asset analysis and
- Risk analysis
As per the Income-tax Act companies who are required to file TP reports has to file FORM 3CEB to the tax department duly certified by a chartered accountant before the due date of filing income tax.
Penalties for non-compliance
| sub-section (1) or sub-section (2) of section 92D
|| failure to keep and maintain information and document in respect of international transaction
|| sum equal to two per cent of the value of each international transaction entered into by such person
|sub-section (3) of section 92D
|| Penalty for failure to furnish information or document under section 92D.
|| Sum equal to two per cent of the value of the international transaction for each such failure.
||Penalty for failure to furnish report under section 92E.
|| Sum of one hundred thousand rupees.