On This Page: What is Section 92E of Income Tax Act? | What does Section 92B mean when it comes to international transactions? | Understanding Associated Enterprises meaning under section 92A | Understanding Specified Domestic Transactions Meaning as per Section 92BA | What is the Due Date of Return Filing for Assessee Covered under Section 92E? | What is the Penalty Amount in case of Failure to Furnish the Report of CA as per Section 92E?
Under section 92E of Income Tax Act, every person engaged in an international transaction or a specific domestic transaction in the previous year must obtain a report from an accountant and submit it on or before the specified date.
A transaction that meets the following criteria:
A transaction involving two or more related businesses
One of them must be a non-resident
Furthermore, such transactions should be of a commercial nature, as specified in section 92E of Income Tax Act.
Buying, selling, or leasing tangible or intangible property, providing services, or lending or borrowing money
An arrangement between many related businesses in which the conditions of the transaction, such as cost allocation, are predetermined
An enterprise in which the people involved in administration, control, or capital, either directly or indirectly or through intermediaries, are the same people who are involved in the other enterprise in a similar way
One company controls at least 26% of the voting power in the other company, either directly or indirectly
Any person or business owns, directly or indirectly, 26% of the voting power in each of these businesses
A loan made by one company to another company that represents at least 51% of the other company's entire assets' book value
If one company guarantees at least 10% of the total borrowings of the other company
Anyone can appoint more than half of the board of directors or one or more executive directors for each of these businesses
When the same person or persons appoint higher than 50% of the directors or members of the governing board, or one or more of the executive directors or members of the governing board
Such a company's business is entirely reliant on the know-how, copyright, patent, and secret formula of another company
The other enterprise supplies 90% or more of the raw materials and consumables required by one enterprise
The items or articles produced by one company are sold to another company, and the prices and other terms are influenced by the other company
When one business is controlled by an individual, the other business is likewise controlled by that individual, either directly or indirectly through a relative, or jointly by such individual and his relative
One company owns at least 10% of another company, such as a partnership firm, an AOP, or a BOI
If there is a mutual interest link between the two businesses
Previously, transfer pricing laws solely applied to cross-border transactions. The Finance Act of 2012, on the other hand, broadened its reach to include certain domestic transactions involving related parties within the country. We'll see which transactions are classified as specified domestic transactions now:
"Specified domestic transaction" is:
any transaction described in section 80A;
any transfer of goods or services that is referred to under section 80-IA(8);
any business conducted between the assessee and a third party as defined in section 80-IA(10);
any transaction described in any other section of Chapter VI-A or section 10AA that is subject to the provisions of section 80-IA(8)/(10);
any business conducted between the individuals listed in section 115 BAB(4);
any such transactions that may be deemed necessary
and where the assessee's total of such transactions in the previous year surpasses a prescribed quantity of ₹20 Crore. If the threshold limit is exceeded, taxpayers will be forced to comply with transfer pricing requirements for all transactions, regardless of how little or insignificant the value of individual transactions may be.
In the case of transactions referred to under section 92E, the due date for filing an income tax return is November 30th.
In the case of failing to provide a CA report, a penalty of ₹1,00,000/- is imposed under section 271BA.