Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether Domestic Transfer Pricing Provision Is Applicable If No Value Is Recorded In Books Of Account?

QUERY: The Finance Act, 2012 had introduced an amendment that transfer pricing provisions will apply to Specified Domestic Transactions (SDT) if the aggregate value of such transactions exceeds Rs. 5/- crores. What would the term refer to here? Is it possible to argue that if no value is recorded for a transaction in the books of accounts, it will not attract the TP provisions?
ANSWER: S. 92BA has been inserted by the Finance Act, 2012 with effect from April 01, 2013 which reads as under:

Meaning of specified domestic transaction

‘92BA. 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:-

(i) 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;

(ii) any transaction referred to in section 80A;

(iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA;

(iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA;

(v) 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

(vi) 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 five crore rupees.

Thus reading the above section, it is clear that it does not say ‘value’ but it says that ‘aggregate of such transactions ……. exceeds a sum of five crore rupees’ . Which means that aggregate amount of aforementioned transactions at arm's length price, should exceed rupees five crore. Thus a sum means a value in money. Therefore, the transaction should have a value to determine a sum of rupees five crore.
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