The Indian transfer pricing regulations are expected to provide a more robust framework for taxpayers and the revenue authorities alike to demonstrate the arm’s-length character of their related-party transactions. However, Amit Agarwal of Ernst & Young argues that the wide discretion conferred on the revenue authorities in the interpretation and implementation of these regulations has spawned a cesspool of tax controversies leading to substantial tax adjustments. It is reported that in the latest round of transfer pricing audits the cumulative value of these adjustments was $8.9 billion.
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