Laurus Labs Limited specializes in providing scientific research services to various non-resident clients, including Meta Inc. A key aspect of this…

CA Final · Direct Tax Laws and International Taxation · MTP · May 2025
Laurus Labs Limited specializes in providing scientific research services to various non-resident clients, including Meta Inc. A key aspect of this arrangement is that Meta Inc. extends a guarantee for 12% of Laurus Labs Limited's total loans. The primary consideration here is whether this financial guarantee constitutes an “international transaction” under the transfer pricing provisions of the Income-tax Act, 1961.

Suggested Answer and Working Notes:

Provision of scientific research services falls within the scope of international transaction under section 92B. Laurus Labs Limited and Meta Inc. are deemed to be associated enterprises as per section 92A (2) (d), since Meta Inc. guarantees not less than 10% of the total borrowings of Laurus Labs Limited. Since there is an international transaction between associated enterprises, transfer pricing provisions are attracted in this case.

Topics: Transfer Pricing

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