Section 92D of the Income Tax Act
The decision most relied on for Section 92D is Rampgreen Solutions (P.) Ltd. v. CIT (60 Taxmann.com 355), cited in 71 of the 112 judgments on BharatTax that turn on this section.
Leading authorities on Section 92D
The Delhi High Court clarifies that companies providing Knowledge Process Outsourcing (KPO) services, such as data analytics and computer-aided simulations, are functionally not comparable to entities offering low-end Information Technology Enabled Services (ITeS) for transfer pricing analysis. This distinction is crucial for selecting appropriate comparable companies and adjusting for functional differences.
The assessee bears the initial burden to maintain and produce authentic documentation under Section 92D and Rule 10D to justify transactions with related parties, especially concerning the arm's length price for such transactions under Section 40A(2)(b). The discharge of this statutory obligation to maintain accurate data is a mandatory requirement of law.
Outstanding invoices with a foreign associated enterprise are considered international transactions under Explanation to section 92B, and transfer pricing provisions apply as anti-abuse measures, overriding general provisions. Notional interest income can be brought to tax based on the arm's length principle, even if it involves assumptions.
A company is considered a comparable in transfer pricing analysis unless it is shown to be functionally incomparable.
Penalty under Section 271G cannot be imposed for mere technical lapses or non-compliance with transfer pricing documentation requirements if substantial compliance is demonstrated and the Assessing Officer (AO) or Transfer Pricing Officer (TPO) did not issue a specific requisition for particulars under Section 92D(3).
Judgments on Section 92D
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