Transfer Pricing in India

Auditing & Documentation

under

Transfer Pricing Law in India

NIRC OF ICWAI

JAIN K. VRIND & CO. AChartered AccountantsACA. KRISHAN VRIND JAIN

Sco 345-346, sector 35-B, Chandigarh.

Auditing & Documentation

under

Transfer Pricing Law in India

NIRC OF ICWAI

JAIN K. VRIND & CO. AChartered AccountantsACA. KRISHAN VRIND JAIN

Sco 345-346, sector 35-B, Chandigarh.

M 09417009490, jainkv@gmail.com

DEC 17TH, 2008

LegislativeOverviewLegislative Overview

.Legislation introduced with effect from April 1, 2001

..Built on OECD Guidelines, but with significant deviations

.Provisions applicable only if:

..Their is an international transaction(s) [defined in Sec 92B] between..

..Two or more Associated enterprises [defined in Sec 92A].

.Exceptions

LegislativeOverviewLegislative Overview

.Legislation introduced with effect from April 1, 2001

..Built on OECD Guidelines, but with significant deviations

.Provisions applicable only if:

..Their is an international transaction(s) [defined in Sec 92B] between..

..Two or more Associated enterprises [defined in Sec 92A].

.Exceptions

..Provisions do not apply in certain cases [Section 92(3)] (if it amounts to reduction)

.Deeming provisions [Section 92B(2)]

..Transaction between an enterprise and a person (other than an associated enterprise)

shall be deemed to be a transaction between two associated enterprises, if there

exists a prior agreement or the terms of such a international transaction are in

substance determined between one of these entities and the associated enterprise of

the other contracting entity.

The transaction may be

Purchase, sale or lease of tangible or

intangible property; or

Provision of services; or

Lending or borrowing money; or

Any other transaction having a bearing on profits,

Any other transaction having a bearing on profits,

income, losses or assets of an AE.

Cost sharing arrangement, that is, a mutual

agreement or arrangement between AEs for the

allocation or apportionment of, or contribution to

any cost or expense incurred in connection with a

"benefit, service or facility" provided to the AE.

The transaction may be

Purchase, sale or lease of tangible or

intangible property; or

Provision of services; or

Lending or borrowing money; or

Any other transaction having a bearing on profits,

income, losses or assets of an AE.

Cost sharing arrangement, that is, a mutual

agreement or arrangement between AEs for the

allocation or apportionment of, or contribution to

any cost or expense incurred in connection with a

"benefit, service or facility" provided to the AE.

An "enterprise" is an AE:Which

participates directly or indirectly in the

management or control or capital of the other

enterprise. This can be explained as under:

An "enterprise" is an AE:Which

participates directly or indirectly in the

management or control or capital of the other

enterprise. This can be explained as under:

An "enterprise" is an AE:If

any person who participates in the

management or control or capital of an

enterprise also participates in the

management or control or capital of the other

An "enterprise" is an AE:If

any person who participates in the

management or control or capital of an

enterprise also participates in the

management or control or capital of the other

Enterprises deemed to be AEs

if at any time during the year

A holds at least 26% of the voting power of

B; (A & B are AEs) or

A holds at least 26% of the voting power of

B & C; (B & C are AEs) or

A d l B i i l

JAIN