What is the legislative intent/objective of bringing into existence the provisions relating to transfer pricing in relation to international transactions ? Explain the statement in the context of Income Tax Act, 1961.

The presence of multinational enterprises in India and their ability to allocate profits among the enterprises within the group in different jurisdictions by controlling prices in intra-group transactions in such a way that there may be either no profit or negligible profit in the jurisdiction which taxes such profits and substantial profit will be in the jurisdiction which is a tax haven or where the tax liability on such profits is minimum. This may adversely affect a country's share of due revenue. The profits derived by such enterprises carrying on business in India can be controlled by the multinational group, by manipulating the prices charged and paid in such intra-group transactions, which may lead to erosion of tax revenue. Therefore, transfer pricing provisions have been brought in by the Finance Act, 2001 with a view to provide a statutory framework which can lead to computation of reasonable, fair and equitable profits and tax in India, in the case of such multinational enterprises.