We are manufacturers of Mobile Accessories a Pvt Ltd Co.
we are doing Related Party Transactions by selling our finished goods to sister concern at 8% discount on the list price and sistern concern sales the sales to dealers on the list price of our co.
Dealer Network is same
Is Transfer Pricing applicable on the transaction
3 Replies
Musrath Shaik
(175 Points)
Replied 18 September 2023
Transfer pricing regulations in India apply to transactions between related parties, ensuring that transactions are conducted at arm's length prices to prevent the shifting of profits between entities within the same group. The rules are primarily governed by Section 92 of the Income Tax Act, 1961, and the Transfer Pricing Regulations as specified in the Income Tax Rules, 1962.
In your scenario, where your manufacturing company (Company A) sells finished goods to a sister concern (Company B) at an 8% discount on the list price, and Company B then sells the same goods to dealers at the list price, it is considered a related party transaction. The fact that the dealer network is the same as your company's makes it even more pertinent to ensure that the pricing is at arm's length.
For further more detailed information on this topic visit:Transfer Pricing: A Key Factor in Tax Compliance
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