Profit Split Method: Is It Becoming the Most Appropriate “Alternate” Method?

In this article, the authors highlight the increasing move by the Indian tax authorities towards adoption of the profit split method of allocating profits of multinational enterprises which undertake operations in India, particularly in relation to marketing intangibles, permanent establishments and contract research and development centres. The article canvasses recent Income Tax Appellate Tribunal decisions and highlights the need for multinational enterprises to protect themselves from the tax authority’s newfound thirst for the profit split method by carrying out detailed functional analyses, which are comprehensively documented.