Transfer Pricing Laws Cannot Be Imposed On Shares Issued To The Foreign Parent

INTRODUCTION

The Hon'ble High Court of Bombay has recently in the case of an Indian unit of Royal Dutch Shell Plc, categorically held that issuance of shares by an Indian Company to its foreign parent is not exigable to transfer pricing provisions as there is no income arising there from.

Transfer pricing practice has always been a topic of discussion all over the world. Transfer pricing rules basically determines the value at which companies trade products, services or assets between two units across borders. The main objective of transfer pricing is to ensure fair prices in cases of transaction between two groups of companies situated in different countries.

BRIEF OVERVIEW OF THE JUDGMENT: