Increasing participation of multi-national groups in economic activities in the country has given rise to new and complex issues emerging from transactions entered into between two or more enterprises belonging to the same multi-national group. With a view to provide a detailed statutory framework which can lead to computation of reasonable, fair and equitable profits and tax in India, government has incorporated various acts keeping in mind various aspects in this relation.

In the case of multinational enterprises, the Finance Act, 2001 substituted section 92 with a new section and introduced new sections 92A to 92F in the Income-tax Act, relating to computation of income from an international transaction in relation to the arm’s length price, meaning of associated enterprise, meaning of information and documents by persons entering into international transactions and definitions of certain expressions occurring in the said section.
What is Section 92?

As substituted by the Finance Act, 2002 states that any income arising from an international transaction or where the international transaction comprise of only an outgoing, the allowance for such expenses or interest arising from the international transaction shall be determined having regard to the arm’s length price. The provisions, however, would not be applicable in a case, where the application of arm’s length price results in decrease in the overall tax incidence in India in respect of the parties involved in the international transaction.

Arm’s length price: In accordance with internationally accepted principles, it has been provided that any income arising from an international transaction or an outgoing like expenses or interest from the international transaction between associated enterprises shall be computed having regard to the arm’s length price, which is the price that would be charged in the transaction if it had been entered into by unrelated parties in similar conditions. The arm’s length price shall be determined by one of the methods specified in Section 92C in the manner prescribed in Rules 10A to 10C that have been notified vide S.O. 808 E dated 21.8.2001.


  • Comparable uncontrolled price method;
  • Resale price method;
  • Cost plus method;
  • Profit split method or
  • Transactional net margin method.

The taxpayer can select the most appropriate method to be applied to any given transaction, but such selection has to be made taking into account the various factors prescribed in the Rules. With a view to allow a degree of flexibility in adopting an arm’s length price the proviso to sub-section (2) of section 92C provides that where the most appropriate method results in more than one price, a price which differs from the arithmetical mean by an amount not exceeding five percent of such mean may be taken to be the arm’s length price, at the option of the assessee.


  • Is your company involved in any international transactions with any of its group companies?
  • Does your company engage in any inter-company transactions affecting the operating results?
  • Does your company render services to/receive services from affiliates free of charge?
  • Does your company pay or/ receive charges pertaining to intangibles or cost allocations?
  • Has your company been incurring operating losses over the past few years?
  • Are you a multinational corporation currently structuring your business plan?
  • Are you restructuring global operations as a result of changing global conditions?
  • Are you restructuring Indian operations with Key management persons of the company?
  • If your answer is “yes” to one or more of the above questions, your company will in all probability require a transfer pricing review.

Specified Domestic Transactions

Form No. 3CEB as prescribed under Rule 10E which is required to be furnished by an accountant under section 92E for International Transactions. Transfer pricing regulations have been extended vide Finance Act2012 to include transactions entered into with domestic related parties or by an undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A and section 10AA. Domestic transfer pricing provisions are applicable from Assessment Year 2013-14 onwards.

All of the compliance requirements relating to transfer pricing documentation, accountant’s report, etc shall equally apply to specified domestic transactions as they do for international transactions amongst associated enterprises.


Section 92BA defines Specified Domestic Transaction (SDT) which is covered by TP regulations. Section 92BA as under:

“For the purposes of this section and sections 92, 92C, 92D and 92E, “specified domestic transaction” in case of an Assessee means any of the following transactions, not being an international transaction, namely:—

  • Any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A;
  • Any transaction referred to in section 80A;
  • Any transfer of goods or services referred to in sub-section (8) of section 80-IA;
  • Any business transacted between the Assessee and other person as referred to in sub-section (10) of section 80-IA;
  • Any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of sub-section (8) or sub-section (10) of section 80-IA are applicable; or
    any other transaction as may be prescribed,
  • And where the aggregate of such transactions entered into by the Assessee in the previous year exceeds a sum of ` 5 crore.’

Threshold Limit

The above referred transactions will be regarded as SDT only if the aggregate value of all the above specified transactions exceeds the threshold limit of ` 5 crore. All the transactions covered under the six limbs as mentioned above will be regarded as SDT only if the aggregate value of all transactions exceeds threshold of ` 5 crore. If the threshold limit is crossed, the taxpayer will be required to comply with TP requirements with reference to all the transactions regardless of the fact that that the value of transactions under one of the limbs may be very small or nominal. Thus, there is no internal threshold for each limb of the definition.

Expenditure in respect of payments made to persons referred to in section 40A(2)(b). The transactions included in the ambit of this section would include expenditure transactions like (illustrative only):

  • Expenditure on buying goods
  • Expenditure on procurement of services
  • Expenditure on interest payments
  • Expenditure on salary, training services, marketing expenses
  • Expenditure on purchase of tangible and intangible property
  • Director’s remuneration, commission, sitting fees
  • Group charges
  • Reimbursement expenditure
  • Guarantee fee expenditure

This provision operates only on the expenditure side and would not have any impact in the hands of the recipients of such payments. Thus only the persons/entities incurring such expenditure would be subject to SDT under this provision and would be required to comply with the relevant transfer pricing compliances. Sections 40A (2) (b) lays down the list of persons who would be covered under this section.

What VJM & Associates Offers

VJM & Associates have skilled team of tax practitioners, economists and financial analysts who are masters in their fields. They focus on reducing threats and increasing opportunities to enhance corporate performance through proactive transfer pricing planning. VJM Domestic transfer pricing and international transfer pricing Practice has wide analyzation of company’s business activity on facts of each case and based on analysis and OECD’ principles, which are successfully met by us with timely thoughts spontaneously, by our experienced experts in Domestic transfer pricing and international transfer pricing, globally to meet the composite TP needs and challenges of global multi-national companies (MNCs). Our expert advice can guide the associated enterprises on transfer pricing policies and measures more absolute and justifiable.

The integration of tax and economics is one of the most important attributes of our transfer pricing capabilities. This unified approach enables us to develop and implement transfer pricing methodologies that are analytically sound, flexible to deal with “real world” situations and fully compliant with the transfer pricing regulations. Further, this approach also ensures a creative and dynamic tax planning process for our clients. As part of our transfer pricing service, we offer advice and assistance in the following areas:


VJM & Associates transfer pricing Team has large practice in transfer pricing field and we have various Tax Consultants under the banner of our firm by giving guidance through professional consulting on various transfer pricing issues and concepts. Our main strategy is studying the concerned industry, billing methodology, transactions, pricing and adoption of correct Transfer Pricing Method. VJM develops transfer pricing solutions and strategies that respond to Associated Enterprises’ objectives and national tax authority’s requirements through proper Tax planning in this area. Analysis on various industries, their turnovers, their business activities, their profit margins, their trends, and reviews on the industries progress quarterly, half-yearly, annually, have been analyzing by us, both statistically and theoretically predicting the correct picture and their risks in various businesses at large. Our team helps in evaluation of alternative business structures from a transfer pricing planning perspective in order to optimize allocation of revenues between group entities.


VJM & Associates specializes in solutions that provide international businesses with an opportunity to comprehensively assess tax position and drive benefits upwards through the company structure. We combine planning, coordination and execution of tax strategies in order to devise flexible solutions that effectively address business changes.


VJM & Associates provide practical and consistent approach and solutions on various risk appraisal and transfer pricing strategy on different risks that guide clients to complete regulatory requirements and fulfill with arm’s length standards. VJM assists companies in preparing a defense against possible future inquiries from revenue authorities by assessing the current transfer pricing policies. The potential risks can then be evaluated and if required, appropriate corrective actions can be implemented. Our global controversy solutions and resources enable our clients to confidently address this dynamic issue with confidence.


Transfer Pricing cases would be taken up to Appellate Authorities or Dispute Resolution Panel or MAP etc. with good Analyzation of cases, facts, figures, data analysis and analysis on comparables and considering fresh or additional evidences. The cases will be presented before the Authorities by experts on Transfer pricing Group in our firm with quality consulting to you.


VJM & Associates also offers clients / customers in providing online Transfer Pricing Documentation work, based on the inputs given by the clients. Further, suitable tax advise and consulting on fixation of Arm’s Length Price and adoption of most appropriate method will also be suggested. This documentation differs from industry to industry and company to company, but on the Transfer Pricing Laws and Concepts. We will provide similar functional comparables from various public data bases both locally and globally, after comparing the FAR Analysis (FAR: functional, Assets and Risk Analysis), basing on economic and market situation. We provide assistance in various aspects of transfer pricing documentation preparation and compliance. A transfer pricing study prepared and supported by sound technical positions significantly reduces the risk of a possible tax contingency.


VJM & Associates guide customers on Transfer Pricing Study and document their global companies’ businesses, inter-company dealings in agreement with the tax regulation authority in the related countries in which they are functioning. VJM offers a more realistic and a dependable solution that help clients / companies to fulfill authoritarian requirements and to maintain with arm’s length standards.


As revenue authorities become more aggressive in applying transfer pricing regulations, disputes are likely to arise. VJM provides a range of services such as domestic transfer pricing and international transfer pricing audit management and assistance in handling competent authority negotiations.

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