Section 92F of the Income Tax Act
The decision most relied on for Section 92F is Maruti Suzuki India Ltd. v. CIT (381 ITR 117), cited in 220 of the 178 judgments on BharatTax that turn on this section.
Leading authorities on Section 92F
The Bright Line Test (BLT) is not a recognized method under the Income-tax Act and Rules for benchmarking advertising, marketing, and promotion (AMP) expenses or for determining the existence of an international transaction or its Arm's Length Price. The Revenue must first establish the existence and price of an international transaction before seeking an ALP adjustment.
The existence of an international transaction must be established before its arm's length price can be determined. An alleged 'excessive' AMP expenditure cannot unilaterally expand the scope of an international transaction if its existence is contested.
Advertisement, Marketing, and Promotion (AMP) expenditure incurred by an Indian entity directly benefits its own business and cannot be automatically treated as an international transaction for global brand building by associated enterprises without specific statutory provisions or proper analysis.
When computing deduction under Section 80IA, specifically for inter-unit transfer of power, the benefit cannot be claimed based on rates chargeable by distribution licensees to consumers. The deduction must be computed based on the rate fixed by the Tariff Regulation Commission for sale by electricity generating companies.
For Section 80IA deductions, the market value of electricity supplied by a captive power plant (eligible unit) to its industrial unit (non-eligible unit) must be computed by comparing prices in the open market and those charged by State Electricity Boards to industrial consumers.
Deduction under Section 80IA is allowable for captive power generation. The price for calculating this deduction is the rate at which the electricity board supplies power to its consumers, rather than the rate at which power generating companies supply to the electricity board.
Commission paid to non-resident agents for services rendered outside India is not taxable in India as income not accruing or arising in India and not being fees for technical services. Consequently, no tax deduction at source under Section 195 is required, and non-deduction does not attract disallowance under Section 40(a)(i)/(ia).
The Delhi High Court holds that expenditure on Advertisement, Marketing, and Promotion (AMP) by a taxpayer is not an international transaction under Section 92B of the Income Tax Act. Consequently, adjustments for AMP expenses in transfer pricing cannot be made without specific statutory provisions.
The transfer price for intra-group services, specifically the sale of power from a captive power plant to a manufacturing unit, can be benchmarked based on the price at which the manufacturing unit procures power from the State Electricity Board, especially when it reflects a reasonable and arm's length price.
Deductions under Section 80G are permissible even when CSR expenditure is disallowed under Section 37(1). The Tribunal upholds the CIT(A)'s order allowing the Section 80G deduction based on prior decisions.
