TRANSFER PRICING IN INDIA: LITIGATION TRENDS AND POLICYRECOMMENDATIONS FOR DISPUTE RESOLUTION

Abstract

This white paper examines the escalating issue of Transfer Pricing (TP) disputes and litigation in India, a critical concern amid the growth of multinational enterprises (MNEs). It investigates the primary causes of TP disputes—selection of comparables, choice of TP methodologies, royalty payments, intra-group services, and intercompany loans—using landmark case studies and statistical data. The paper analyzes litigation trends, highlighting India’s position among the top five countries for TP disputes, with resolution times averaging 5-7 years. It evaluates the effectiveness of dispute resolution mechanisms, including Advance Pricing Agreements (APAs), Mutual Agreement Procedures (MAPs), and the Dispute Resolution Panel (DRP). Recommendations include strengthening APA and MAP frameworks, introducing alternative dispute resolution (ADR) mechanisms, simplifying TP documentation, and leveraging artificial intelligence (AI) for risk assessment. The paper concludes that addressing these challenges can foster a more efficient and business-friendly tax environment in India.