Section 92C(2) of the Income Tax Act
The decision most relied on for Section 92C(2) is Aztec Software & Technologies Services Ltd. v. Asstt. CIT (107 ITD 141), cited in 90 of the 69 judgments on BharatTax that turn on this section.
Leading authorities on Section 92C(2)
The Comparable Uncontrolled Price (CUP) method requires strict comparability conditions between associated enterprise (AE) and non-AE transactions for benchmarking; if these conditions are not met, other transfer pricing methods like the Transactional Net Margin Method (TNMM) may be more appropriate.
Notional interest on delayed payments received from an Associated Enterprise (AE) cannot be treated as part of the income for tax purposes, thereby no question of law arises regarding such adjustments by the TPO/AO.
Transfer pricing adjustments must be restricted to international transactions with associated enterprises and cannot be made at the entity level or in respect of transactions with unrelated parties.
Disallowance of expenses cannot be made if their genuineness is not challenged. For unexplained money, possession of gold jewellery by married ladies up to 500 grams is considered explained.
The cost base for applying the operating profit over total cost margin in transfer pricing cannot be broadened to include costs not incurred by the assessee. Tax authorities cannot impute costs incurred by third parties or associated enterprises for computing the assessee's net profit margin.
The Transfer Pricing Officer (TPO) cannot make adjustments to the entire segment of manufacturing activity. Adjustments can only be made to the extent of international transactions and only to the extent of arm's length price.
Judgments on Section 92C(2)
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