COMPANY 1

(INDIA )
FINAL GOOD COMPANY 3

15
10 LAKHS
10 LAKHS

COMPANY 2 (RELATED
COMPANY )
( MAURITIUS )
COMPANY 1
(INDIA )
FINAL GOOD COMPANY 3

15
10 LAKHS
10 LAKHS

COMPANY 2 (RELATED
COMPANY )
( MAURITIUS )
ABOUT TRANSFER PRICING
● Transfer pricing is an accounting practice that allows
for the establishment of prices for the goods and
services exchanged between, divisions, subsidiaries or
affiliates that are part of the larger enterprise

● Usually, Companies use transfer pricing to reduce the

overall tax burden of the parent company.

● This is done by charging a higher price to subsidiaries

in high-tax countries (reducing profit) while charging a
lower price (increasing profits) for subsidiaries in low-
tax countries.
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ARM'S LENGTH PRINCIPLE
THAT IS RELATED COMPANY
TRANSACTIONS SHOULD BE
MADE AT PRICE WHICH COULD
BE CHARGE FROM UNRELATED
ENTITIES i.e FAIR MARKET
PRICE.
QUESTION OF DAY ??