Section 92F — Definitions Relating to Transfer Pricing

Section 92F of the Income-tax Act, 1961 provides definitions for terms used in the context of transfer pricing regulations. It is crucial for understanding the provisions related to international transactions and specified domestic transactions between associated enterprises. The section defines key terms such as 'arm's length price', 'enterprise', 'permanent establishment', and 'transaction', among others. These definitions form the foundation for applying transfer pricing rules, ensuring that transactions between related parties are conducted at prices comparable to those between unrelated parties. The significance of Section 92F lies in its role in preventing tax evasion through manipulation of prices in cross-border transactions. The burden of proof generally lies with the taxpayer to demonstrate that the pricing of their transactions is at arm's length, adhering to the definitions and guidelines provided in this section.

Common Litigation Flashpoints

1. Interpretation of 'arm's length price'
2. Classification of 'associated enterprises'
3. Determination of 'permanent establishment'
4. Scope of 'international transaction'

Judgments on Section 92F — Definitions Relating to Transfer Pricing

• 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.
• Hyatt International Southwest Asia Ltd. vs Additional Director of Income Tax — SC,
  A Permanent Establishment exists if the enterprise has a fixed place of business at its disposal through which it carries on its business activities.
• 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.