Section 92 of Income-Tax Act, 1961
Section 92 of Income-Tax Act, 1961 deals with Computation of income from international transaction having regard to arm's length price..
From the Act
(1) Any income arising from an international transaction shall be computed having regard to the arm's length price.
For the removal of doubts, it is hereby clarified that the allowance for any expense or interest arising from an international transaction shall also be determined having regard to the arm's length price.
(2) Where in an international transaction [or specified domestic transaction], two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm's length price of such benefit, service or facility, as the case may be.
The following sub-section (2A) shall be inserted after sub-section (2) of section 92 by the Finance Act, 2012, w.e.f. 1-4-2013 :
(2A) Any allowance for an expenditure or interest or allocation of any cost or expense or any income in relation to the specified domestic transaction shall be computed having regard to the arm's length price.
(3) The provisions of this section shall not apply in a case where the computation of income under sub-section (1) [or sub-section (2A)] or the determination of the allowance for any expense or interest under [that sub-section], or the determination of any cost or expense allocated or apportioned, or, as the case may be, contributed under sub-section (2) [or sub-section (2A)], has the effect of reducing the income chargeable to tax or increasing the loss, as the case may be, computed on the basis of entries made in the books of account in respect of the previous year in which the international transaction [or specified domestic transaction] was entered into.]
Recent Cases / Related Cases / Case Law
- Mazagaon Dock Ltd. v. CIT/CEPT  34 ITR 368 (SC): ‘Business’ must be of the resident - The word ‘therefrom’ in the context can refer only to the business of the resident, and it is this business that is the subject of the charge under section 92. The provision speaks not of the non-residents carrying on business in the abstract but of their carrying on business with the resident and in the context it must include all activities between them having relationship to their business.
- Mazagaon Dock Ltd. v. CIT (supra): Meaning of ‘carry on business’ - A non-resident should be held to carry on business with a resident if the dealings between them from concerted and organised activities of a business character.
- Mazagaon Dock Ltd. v. CIT (supra): No separate assessment of profits - The profits chargeable under section 92 need not be separately assessed, and can be added to the other income of the assessee-resident for the purpose of assessment.
- Section 2: Definitions. Includes meanings of various terms used in the Indian Income Tax Act, 1961
- Section 92A: Meaning of associated enterprise
- Section 92B: Meaning of international transaction
- Section 92BA: Meaning of specified domestic transaction
- Section 92C: Computation of arm's length price
- Section 92CA: Reference to Transfer Pricing Officer
- Section 92CB: Power of Board to make safe harbour rules
- Section 92D: Maintenance and keeping of information and document by persons entering into an international transaction
- Section 92E: Report from an accountant to be furnished by persons entering into international transaction
- Section 92F: Definitions of certain terms relevant to computation of arm?s length price, etc.
Sections of the Indian Income Tax Act, 1961
- Section 1 - 40 of Income-Tax Act, 1961
- Section 41 - 80 of Income-Tax Act, 1961
- Section 81 - 120 of Income-Tax Act, 1961
- Section 121 - 160 of Income-Tax Act, 1961
- Section 161 - 200 of Income-Tax Act, 1961
- Section 201 - 240 of Income-Tax Act, 1961
- Section 241 - 280 of Income-Tax Act, 1961
- Section 281 to end of Income-Tax Act, 1961
- Schedules and Appendix of Income-Tax Act, 1961