Transfer Pricing Governance Alignment.
Transfer pricing is decided in the boardroom long before it is defended in an assessment.
A foreign-owned Indian company books a management fee to its parent, a cost-plus mark-up on its services, and a royalty on group IP — and the board treats all three as finance-team mechanics handled by the tax advisor at year-end. The transfer-pricing exposure those flows create, however, is a governance question: it turns on decisions about who does what for whom across the group, taken well before any documentation is prepared.
When an assessment challenges the pricing, the board discovers that the defensibility of those positions was set by the intercompany arrangements it never supervised. This page covers how intercompany dealings are brought under board oversight; it does not cover transfer-pricing computation, benchmarking, or APA strategy, which are owned at intercompany structuring and transfer pricing architecture.
How We Align Pricing with Governance.
The firm treats transfer pricing as a governance exposure that happens to be measured in tax terms. The arm’s-length standard under Sections 92 to 92F of the Income Tax Act tests whether intercompany dealings are priced as they would be between unrelated parties — but whether they can pass that test is decided by the substance of the arrangements, which is a board-level matter, not a documentation exercise.
We design the oversight so the board supervises the intercompany model itself: the functions, the flows, and the rationale behind them, recorded as they are decided rather than reconstructed under assessment. The lenses below frame what the board must own.
- Substance alignment Whether the intercompany arrangements reflect what each entity actually does, since pricing that diverges from real function is what an assessment dismantles first.
- Related-party control How related-party transactions are approved and recorded under the Companies Act 2013, so the governance trail and the tax position tell the same story.
- Board supervision Which intercompany decisions reach the board before they are priced, rather than surfacing only when the return is filed.
- Documentation as record Whether the contemporaneous record is a by-product of governed decisions or a year-end reconstruction that invites scrutiny.
Governing Intercompany Dealings Before They Are Priced.
The decision that determines whether transfer-pricing positions hold is governance, not computation: who supervises the intercompany model and when. That is examined below.
Where Pricing Risk Becomes a Governance Question
Transfer-pricing risk does not originate in the calculation; it originates in the arrangement. A management fee that no one at board level can tie to identifiable services, a mark-up that does not match the functions the Indian entity actually performs, a royalty for IP whose use is not evidenced — each is a pricing position that fails not because the number was wrong but because the substance behind it was never governed. The arm’s-length standard is ultimately a test of substance, and substance is a board responsibility.
This is also where the Companies Act 2013 and the tax position meet. Related-party transactions are governed under Section 188 and, for material dealings, through the audit committee and board approval — the same intercompany flows that transfer pricing scrutinises. When the related-party approval trail and the transfer-pricing rationale are built from the same governed decisions, they reinforce each other; when they are assembled separately and late, a gap between them is the first thing an assessment exploits. Aligning the two is the governance discipline this page is about.
Board supervision, in practice, means the material intercompany arrangements are decided and recorded as governance events — with their functional rationale captured when the decision is made, not reverse-engineered at filing. That contemporaneous record is what converts a defensible commercial logic into a defensible tax position. The computation, benchmarking, and any advance-pricing strategy that sits on top of these arrangements are owned at the Tax practice and referenced, not duplicated here.
What Pricing Alignment Sets in Motion.
Bringing intercompany dealings under board oversight changes the company’s position across several fronts:
Assessment defensibility
Positions grounded in governed, recorded substance withstand a transfer-pricing assessment far better than documentation assembled after the fact.
Governance consistency
A single approval trail for related-party dealings keeps the Companies Act record and the tax rationale aligned rather than contradictory.
Board accountability
Supervising the intercompany model puts the exposure where the liability already sits — with the board — instead of leaving it with the finance function.