Transfer Pricing on Domestic Transactions

Transfer Pricing on Domestic Transactions

The Finance ministry has taken notice of suggestion of the Supreme Court in the case of CIT vs. Glaxo Smith Kline Asia (p) Ltd. 2010 where in the court held that domestic transactions between related parties should be covered under Transfer Pricing.

Manipulation of prices could result in shifting of profits between a loss making entity and a profit making entity so as to enjoy an overall reduced tax rate. Similarly profit shifting to an entity enjoying tax concession under an incentive scheme could also be achieved through pricing of transactions of such entity with another related company.

  W.e.f. 01-04-2013 section 92, 92C, 92D & 92E include “specified domestic transaction” defined under section 92BA.

    Sec. 92 (2A)

Any allowance for

Expenditure,

Interest,

Allocation of any cost,

Expense,

Any income,

In relation to

Specified domestic transaction

Shall be computed to

Arm’s Length price.

    Sec 92BA “Specified Domestic Transactions”

Any of following transactions

Not being an International transaction

And aggregate of such transactions entered exceeds ₹5,00,00,000

·    Any Expenditure

For which

Payment has been/is to be made

To person U/s 40A (2) (b) [Related Party]

·    Any transaction

U/s 80A

·    Any transfer of goods or services

U/s 80-IA (8)

·    Any business transacted between

Assessee & other person

U/s 80-IA (10)

·    Any transaction

Under chapter VI-A or section 10AA

To which section 80-IA (10) or (8) apply

·    Any other transaction as may be prescribed.

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