From financial year 2012-13 inwards require application of transfer pricing rules for domestic transactions with Related Parties. Following is the overview of the latest developments in Domestic Transfer Pricing regulations.
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 Rs 5 crore.
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 Rs 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 Rs 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 :
- 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
How We May Assist you ?
- Planning and advisory services on Related Party Transactions. Our expert advice can guide the associated enterprises on transfer pricing policies and measures more absolute and justifiable.
- Helps in evaluation of alternative business structures from a transfer pricing planning perspective in order to optimize allocation of revenues between group entities.
- TP Audit under IT Act and Certification 3CEB.
- Assistance in preparing TP documentation as required under Rule 10D.
- Representation before TP authorities or Appellate Authorities in case of disputes.