Transfer pricing is governed by section 92C of the incone tax act 1961.
In applies in case of a transaction between associated enterprises. Here the assessee is required to show that the transaction was at an arms length price..i.e it was not prejudiced by the relation of the enterprises.
This means you have to show that the transaction was at a price which would have been charged had it not been between related parties.
Till now it applied only to foreign enterprises..however now it applies to domestic transactions as well
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