Section 92 of the Income Tax Act
Income-tax Act, 2025: s.161
Section 92 of the Income-tax Act, 1961 corresponds to section 161 (Computation of income from international transaction and Specified domestic Transaction having regard to arm’s length price) of the Income-tax Act, 2025.
Read section 161 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 92 is Adobe Systems Inc. v. ADIT (203 Taxmann 554), cited in 59 of the 434 judgments on BharatTax that turn on this section.
Leading authorities on Section 92
A fixed place of business constitutes a Permanent Establishment (PE) under Article 5(1) of a Double Taxation Avoidance Agreement only if the premises are actually at the disposal of the foreign enterprise, thereby satisfying the crucial 'disposal test', and it is through this fixed place that the foreign enterprise carries on its business, wholly or partly.
The Transfer Pricing Officer (TPO) is empowered to determine the Arm's Length Price (ALP) of an international transaction at "nil" if the assessee fails to establish that payments made to an Associated Enterprise (AE) were commensurate with the benefit received or the quality of services availed. This determination constitutes an adjustment to ALP, distinct from a disallowance of expenditure.
For a place to constitute a Permanent Establishment (PE), it must be at the 'disposal' of the enterprise, and the business must be carried on through that place.
Penalty under Section 271G cannot be imposed for failure to furnish segment-wise details of related and non-related party transactions in the diamond industry due to practical difficulties.
A company that is functionally dissimilar to the assessee and has been excluded in similar cases of other assessees should be excluded from the list of comparable companies for the purpose of determining the arm's length price.
The Comparable Uncontrolled Price (CUP) method is the most direct method for determining the arm's length price of international transactions and should be preferred over other profit-based methods.
