In today's world, as more and more multinational corporations are entering into India the number of transactions between entities within the same group are increasing. As the number of transactions are increasing the complexity between the international transactions are also increasing. Due to growing complexity of these international transactions, the multinational corporations are in need of expert advice in relation the transactions entered within the same group as these transactions have a bearing on the profitability of the company.
The international transactions within the same group offers an incentive to the multinational corporations to shift their profit in low tax jurisdictions by determining the price of the transactions entered between its group companies.
Indian government was continuously monitoring these practices because of which Transfer Pricing Regulations were introduced in 2001. In 2001, government came up with the detailed regulations by introducing sections related to Transfer Pricing under Income Tax Act, 1961 and Income Tax Rules, 1962.