India Transfer Pricing & Permanent Establishment Disputes: Characterisation, Profit Attribution And Litigation Strategy

Executive Summary

Within most multinational groups, transfer pricing is still perceived primarily as a technical compliance function. It is frequently treated as a year-end margin exercise — a benchmarking study intended to ensure that operating profit falls within a statistical range. Boards often view it as a documentation issue, while finance teams approach it as a provisioning variable.

This article explains:

• Why transfer pricing disputes are rarely arithmetic disagreements.
• Why adjustments seldom arise merely from statistical variance in margins, but instead stem from challenges to the taxpayer's economic narrative — including the identity of the tested party, allocation of risks, ownership of intangibles and control over key functions.