Location Savings - Is A TP Adjustment Required?

The first question that comes to mind is that what is Location Savings? The answer to this is very simple; when a Multinational Enterprise (MNE) saves costs by relocating facilities from a high-cost jurisdiction to a low-cost one, it is considered location saving under transfer pricing terminology. From a business and strategic point of view a MNE is perfectly justified in its decision to relocate. One may ask why should there be an issue at all as the jurisdiction where the operations are located say for eg. India would stand to gain in terms of taxes?

The tax authorities in India claim that the Indian enterprise should additionally be compensated for the location savings that the MNE would have had by relocating their operations to India.