Global trade has increased after the globalization and as a
result of it, multinational companies has started operating in
different countries with country specific taxation laws and rates.
The transactions have also increased between such related or
associated enterprises under the different conditions from those
taking place between independent enterprises.
In such circumstances, the multinational companies used to set
up transfer prices in such a manner that it minimizes the overall
tax burden of the company such as corporate taxes, import duties
and other tariff, etc. Therefore, many countries have enacted laws
to prevent such tax avoidance practice and tax the transaction at
arm's length prices. Arm's length prices are those prices
which come from the transactions occurred between the independent
enterprises without influencing the parties. Generally, tax
authorities try to limit the scope for the multinational companies
to shift their profit with transfer
