Whether NIL price can be an arm's length price?
Normally one expects a quid pro quo in the form of market price or arms length price for any good sold or service rendered. However, there are exceptions to this Rule where it is possible that NIL Price itself may be the arm's length price.
This brings us to the concept of Shareholder Services. As the name suggests these services are generally rendered by parent shareholder to subsidiary. The principal reason for rendering these services is the benefit to group as a whole rather than direct benefit to recipient alone.
For example consolidation of accounts, high level strategic or directional guidance and in some cases even interest free loans (for group objective of acquisition) fall in this category.
The concept of Shareholder Services has also received the stamp of approval from Indian Courts. Notably the Supreme Court in Morgan Stanley case held that quality training services by parent to subsidiary was not really a service as it was for group benefit (though stated in context of Service PE echoes the same concept).
Whether or not a service qualifies as shareholder service has to be examined on the facts of each case. Just one another nuance that must be factored in Transfer Pricing Analysis - not all services are to be paid for - for some the consequential group benefit is the reward in itself.