Sec. 92 :An amendment is proposed to the transfer pricing provisions which would extend the purview of the provisons to include within its scope not only international transactions but certain specified domestic transactions. The proposed amendment is to take effect from 1st day of April, 2013

International Transactions: Sec. 92B

The Finance Bill by way of proposed amendment has clarified that the definition of International Transaction w.e.f 1st April, 2002 shall include the following:

  • purchase, sale, transfer, lease or use of tangible property and intangible property
  • capital financing, borrowing, lending or guarantee
  • provision of services
  • transaction with an associated enterprise for business restructuring or reorganization

It is further clarified that the definition of international transaction would include a transaction of intangibles in various categories. Some of the categories included, relate to marketing‟, technology, art, engineering, goodwill, etc.

Sec. 92BA:This proposed Sec. includes "specified domestic transactions" between related parties when the aggregate of such transactions in the previous year exceeds a sum of five crore rupees. The following are the transactions sought to be included within this Sec.:

  • payment of expenditure to an associated party as referred to in Sec. 40A(2)(b)
  • any transaction referred to in Sec. 80A;
  • transfer of goods or services in Sec. 80-IA(b) (deductions for industrial undertaking or enterprises engaged in infrastructure development, etc.)
  • any business transacted between the assessee and other person as referred to in Sec. 80-IA(10)
  • transaction, referred to in Chapter VI-A or Sec. 10AA (SEZ)

Computation of Arm's length price: Sec. 92C

The present Sec. as it stands provides that if there is a variation of more than 5% between the price of the international transaction and the determined arm‟s length price then in such case the actual price is deemed to be the arm‟s length price. However w.e.f. 1st April, 2013 this has been proposed to be amended to provide a maximum tolerable variation of 3% for determining the arm‟s length price.

Section 92C(2B) & 92C(2C): Further with a proposed amendment the Sec. has brought within the scope of the Transfer Pricing Officers powers, the power to determine the arm‟s length price in an international transaction since 1st June, 2002 during proceedings before him even if such transaction was not referred to him by the AO. However, the Transfer Pricing Officer may only initiate proceedings to determine the arm‟s length price if a report was not filed in respect of the transaction as required under Sec. 92E.

This section does not empower an AO to assess or reassess proceedings completed before 1st day of July, 2012

Penalties: Sec.s 271AA & 271G imposing penalties have been proposed to be amended to include "specified domestic transactions" within their scope.

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