There are various types of international transactions multinational companies engage into within their group. Out of these transactions, there are few which are always under the Eye of Income Tax authorities. One of such transaction is “Intra group services”.
Nowadays is an era of globalization, wherein various departments, functions, services are centrally organised at the headquarter level in a group of companies. Same are utilized by group companies situated in various corners of the world. Often, such services are provided by one of group companies to whole group and cost incurred by service provider is recovered from the recipient companies.
I Co Ltd is an Indian company which is having similar set up of management services (as described above) provided by parent entity F Co Ltd situated in country abroad and providing services to various group companies globally. Basket of management services include support or assistance in various functions such as IT, Human resource, Legal advisory, Technical development of product etc. For this F Co Ltd charges fees per month as per allocation based on appropriate factor such as sales % incurred by all recipient companies.
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2. Many a times, company in India is proposing to enter into a new transaction with its foreign affiliate. Such Indian company prefers an advice before actual incurring of transaction instead of post-mortem exercise in the form of Transfer pricing audit. Such an advisory helps to understand issues involved and solutions to resolve the same in advance and to avoid future hassle.
I Co Ltd proposed to start a new line of service with its foreign affiliate F Co Ltd. In this case, I Co Ltd is proposed to provide certain services to F Co Ltd. These services will be provided by set of employees of I Co Ltd situated in India to F Co Ltd situated abroad.