Commercially Irrational Transactions

In transfer pricing transactions may be disregarded, and if appropriate, replaced by an alternative transaction, where the arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner, thereby preventing determination of a price that would be acceptable to both of the parties taking into account their respective perspectives and the options realistically available to each of them at the time of entering into the transaction.
It is also a relevant pointer to consider whether the MNE group as a whole is left worse off on a pre-tax basis sincethis may be an indicator that the transaction viewed in its entirety lacks the commercial rationality of arrangements between unrelated parties.
The key question in the analysis is whether the actual transaction possesses the commercial rationality of arrangements that would be agreed
between unrelated parties under comparable economic circumstances, not
whether the same transaction can be observed between independent parties.