Section 92CA — Reference to Transfer Pricing Officer

Section 92CA of the Income-tax Act, 1961, empowers the Assessing Officer (AO) to refer the computation of arm's length price in international transactions or specified domestic transactions to the Transfer Pricing Officer (TPO). This section is significant as it ensures that transactions between associated enterprises are conducted at market value, preventing profit shifting and tax base erosion. The TPO, upon reference, examines the documentation and determines the arm's length price, which the AO then uses to compute the taxable income. The burden of proof lies with the taxpayer to justify the pricing of their international transactions. This section is crucial in maintaining the integrity of the tax system by ensuring fair pricing in cross-border transactions.

Common Litigation Flashpoints

1. Disagreement over the selection of comparables
2. Challenges to the methodology used for determining arm's length price
3. Disputes over the adjustments made by the TPO
4. Contentions regarding the documentation sufficiency

Judgments on Section 92CA — Reference to Transfer Pricing Officer

• M/s. Goldman Sachs Services Pvt. Ltd. vs Joint Commissioner of Income Tax — ITAT, 2020
  Disallowance under section 14A is not applicable if no exempt income is earned during the assessment year.
• DCIT-7(1)(1) vs Goldman Sachs (India) Securities Pvt. Ltd. — ITAT,
  Discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business.
• Vodafone International Holdings B.V. vs Union of India & Anr. — SC,
  Section 9 of the Income Tax Act does not cover indirect transfers of capital assets situated in India.
• The Authority for Advance Rulings (Income Tax) and Others vs Tiger Global International II Holdings — SC,
  The DTAA between India and Mauritius allows capital gains to be taxed only in Mauritius, provided the entity holds a valid TRC.
• SAP Labs India Private Limited vs Income Tax Officer, Circle 6, Bangalore — SC,
  The High Court can scrutinize the Tribunal's determination of the arm's length price if it is alleged to be perverse or not in accordance with the guidelines under the IT Act and Rules.
• Sony Ericsson Mobile Communications India Pvt. Ltd. vs Commissioner of Income Tax – III — HC,
  AMP expenses can be considered an international transaction if they benefit the foreign AE and require compensation at arm's length price.
• M/s DIT (International Taxation), Mumbai vs M/s Morgan Stanley & Co. INC — SC,
  A Permanent Establishment exists if services are furnished through employees in India, and the arm's length price should be determined using the most appropriate method, such as TNMM.
• Maruti Suzuki India Ltd vs Commissioner of Income Tax — HC,
  AMP expenses incurred by an assessee cannot be treated as an international transaction under Section 92B unless there is evidence of an agreement or understanding with the associated enterprise.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.
• M/s. Texas Instruments (India) Private Limited vs ACIT (LTU), Bengaluru — ITAT,
  Expenses incurred for software usage and IT support services, which do not result in acquisition of any asset or enduring benefit, are revenue in nature.