a) Domestic Transfer Pricing [DTP] – Sections 92, 92BA, 92C, 92CA, 92D & 92E


The Finance Act 2012 has introduced DTP in spite of existing provisions under the Act which empower the Assessing Officer (AO) to re-compute the income of assessees availing profit-linked deductions if there are transactions with related parties or other undertakings of the same assessee (Sections 80A, sub section (8) and (10) of section 80-IA, certain sections under Chapter VI-A, or section 10AA). These transactions are presently benchmarked against fair market value. In this regard the following points require consideration:

Harmonization of the “related party” definitions: Presently, two different sections referred to in section 92BA and section 92A of the Act have different thresholds for determination of the ‘related party’ definitions’ which are as under:

  • Associated Enterprises – Not less than 26% of voting power – Section 92A(2)(a) & (b)
  • Associated Person – Not less than 26% of voting power – Section 80A read with section 35AD(8)


There is clearly a need for harmonization of the different thresholds for the related party definitions’ in the sections 92A(2) and 80A read with section 35AD(8). Necessary amendments in this regard may be appropriately made

b) Arm’s Length Price vs Ordinary Profits:


Section 80-IA(8) deals with “ordinary profits” whereas transfer pricing compliance refers to the “Arm‘s Length Price” of the transactions.

Currently, APA provisions are being made applicable to only international transactions.


Conceptually, ‘price principles’ cannot apply for benchmarking of ‘profits’.

The same should also be made applicable to domestic transactions covered by DTP provisions

c) Documentation Requirements:


Where the volume of specified domestic transactions (SDT) is below the threshold limit, the maintenance of documentation as required for transfer pricing should not be applicable.


It is suggested that the maintenance of documentation as required for transfer pricing should not be applicable. Alternatively a threshold limit of Rs. 25 crore be introduced for TP documentation requirements.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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Category : Income Tax (28805)
Type : News
Tags : Budget (2028) ICAI (2807) Transfer Pricing (423)

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