Section 173 — Definitions of certain terms relevant to determination of arm's length price, etc. Successor to s.92F of the 1961 Act.
Section 173 is in Chapter X — Special Provisions Relating to Avoidance of Tax, which runs from section 161 to section 177.
It is the definition section for the transfer pricing group, and it says so: the meanings it gives apply for itself and for sections 161, 162, 163, 165, 171 and 172. It defines "arm's length price" as a price applied or proposed to be applied in a transaction between persons other than associated enterprises in uncontrolled conditions; "enterprise" as a person, including a permanent establishment of that person, engaged, formerly engaged or proposed to be engaged in any of seven listed activities — goods, intellectual property, technical data, services, contract work, investment or lending, and dealing in securities of another body corporate — whether carried on directly or through units, divisions or subsidiaries and wherever located; "permanent establishment" as including a fixed place of business through which the business is wholly or partly carried on; "specified date" as the date one month before the due date for furnishing the return under section 263(1) for the relevant tax year; and "transaction" as including an arrangement, understanding or action in concert, whether or not formal, in writing, or intended to be legally enforceable.
The definitions are drawn deliberately wide so that the transfer pricing provisions cannot be avoided by informality or by structuring: an unwritten and unenforceable understanding is still a transaction, and an entity that has merely proposed to engage in an activity is still an enterprise.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Specified date | One month before the due date for furnishing the return of income under section 263(1) | For the relevant tax year | 173(d) |
The date to diarise is the "specified date" — one month before the section 263(1) return due date — because the transfer pricing obligations elsewhere in the Chapter run to it rather than to the return date. When testing whether something is caught, start from the width of clause (e): an informal, oral, unenforceable arrangement or an action in concert is a transaction, so the absence of a contract proves nothing. Likewise clause (b) captures a person who "has been" or "is proposed to be" engaged in the activity, and reaches through units, divisions and subsidiaries wherever located.
Two associated enterprises settle a supply arrangement over a call, with nothing in writing and no intention that it be enforceable in court. Clause (e) still makes it a "transaction" — an arrangement, understanding or action in concert counts whether or not it is formal, in writing, or intended to be enforceable by legal proceeding — so it is open to arm's length pricing like any signed contract. The enterprise on the other side need not even be trading now: clause (b) covers a person who is, has been, or is proposed to be engaged in the listed activities. A firm that then works to the return due date is already late, clause (d) fixing the specified date one month before the due date under section 263(1).
A taxpayer never meets section 173 by itself. Its meanings are what a transfer pricing proceeding under sections 161, 162, 163, 165, 171 and 172 runs on, and its "specified date" is the deadline that governs the accountant's report required under those sections.
"arm's length price" means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See the notifications index.