Section 92C

Section 92C — the law in short

What the courts have decided on section 92C, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• SAP Labs India P Ltd v ITO Supreme CourtHelps department
  The Tribunal fixed my arm's length price and the department has gone to the High Court — can the High Court reopen the comparables, or is the Tribunal's finding final?
  No, the Tribunal's determination is not final. The Supreme Court held on 19 April 2023 that there is no absolute rule that an arm's length price fixed by the Tribunal cannot be examined under section 260A. Chapter X and Rules 10A to 10E lay down guidelines; a determination made in disregard of them is perverse, and perversity is itself a substantial question of law. The High Court may therefore examine comparability of companies, the selection of filters and whether non-comparable transactions were treated as comparable. The Karnataka High Court's contrary view in Softbrands India was rejected and the whole batch was remitted.
• PCIT v S.G. Asia Holdings (India) Pvt Ltd Supreme CourtCuts both ways
  The Assessing Officer worked out the arm's length price himself and added to my income without ever sending the transaction to the Transfer Pricing Officer. Is that adjustment good?
  No, but it does not follow that you keep the money. The Supreme Court held that the Assessing Officer breached the Board's mandatory instructions by not making the reference, so the adjustment could not stand as made. It then refused the Tribunal's remedy of simply deleting the adjustment, and restored the matter to the Assessing Officer so that the reference could be made and the Transfer Pricing Officer could do the work. The defect is one of procedure and the Court cured it by sending the file back.
• DIT v Morgan Stanley & Co Inc Supreme CourtCuts both ways
  Our Indian affiliate is paid at arm's length. Can more profit still be attributed to a PE?
  No, provided the transfer pricing analysis takes into account all the risk-taking functions of the entity that also constitutes the permanent establishment. Anything further would tax the same profits twice. On the facts, back-office work was preparatory or auxiliary and created no fixed place or agency PE, but deputing employees to work in India created a service PE.
• PCIT v Veer Gems High CourtHelps taxpayer
  The TPO says I control the foreign party in substance, so we are associated enterprises. Is de facto control enough under s.92A?
  No. s.92A(1) and s.92A(2) have to be read together. Sub-section (2) is not a list of examples of the participation described in sub-section (1) — it controls what counts as participation, so unless one of its clauses is actually satisfied, de facto or even de jure participation in the capital, management or control of the other enterprise does not make the two enterprises associated enterprises, and the transfer pricing machinery never starts.
• Indorama Synthetics (India) Ltd v Additional CIT High CourtHelps taxpayerHigh Courts differ
  The Assessing Officer referred my case to the TPO in a one-paragraph letter without dealing with my objection that there was no international transaction at all. Can I attack the reference itself?
  Yes. The Delhi High Court held that the Assessing Officer's satisfaction, even prima facie, that there IS an international transaction or specified domestic transaction is a sine qua non for a reference under s.92CA(1); where the assessee raises a threshold objection to jurisdiction, the officer must deal with it and must give a hearing before recording his satisfaction. The three references were set aside and the officer directed to decide afresh after hearing the assessee. The Court concurred with the Bombay High Court in Vodafone India Services and declined to follow the contrary Gujarat decision in Veer Gems, noting that CBDT Instruction No. 3 of 2016 has itself adopted the Bombay position.
• Bausch & Lomb Eyecare (India) Pvt Ltd v ACIT High CourtHelps taxpayerUnder appeal
  The TPO says my advertising and marketing spend built my foreign parent's brand and has added a mark-up. There is no agreement with the parent about it. Can he do that?
  No. The Delhi High Court held that before Chapter X can be used at all, the Revenue must show an international transaction exists. For advertising, marketing and promotion spend that means showing an agreement, arrangement or understanding with the associated enterprise obliging the Indian company to spend excessively to promote the foreign brand. It cannot be inferred from shareholding, from the incidental benefit to the brand owner, or from the bright line test, which Sony Ericsson had already rejected. There is no machinery provision to identify or price such a transaction. The assessee's appeals were allowed and the Revenue's dismissed.
• CIT v Pentair Water India P Ltd High CourtHelps taxpayerNo later treatment found
  The TPO benchmarked my small captive unit against Infosys and Wipro. Can turnover be ignored?
  No. Turnover is obviously a relevant factor in judging comparability, because scale drives bargaining power, risk profile and margins. Companies with turnover 23 to 65 times that of the tested party were rightly excluded, and functional similarity alone does not conclude the enquiry.
• Rampgreen Solutions P Ltd v CIT High CourtHelps taxpayer
  My company runs voice-based call centres, but the Transfer Pricing Officer has benchmarked me against high-margin analytics companies because we are all called ITeS — can he do that?
  No. The Delhi High Court held on 10 August 2015 that where the tested party is not a knowledge process outsourcing provider, a KPO cannot be used as a comparable. The broad label of information technology enabled services covers services of completely different content and value, and Rule 10B(2)(a) requires comparability to be judged by reference to service characteristics. eClerx and Vishal Information Technologies were both excluded — eClerx as a KPO doing data analytics and financial services work, Vishal because it outsourced most of its work and so had a wholly different cost structure. The Tribunal's order and the final assessment order were set aside.
• ChrysCapital Investment Advisors v DCIT High CourtCuts both ways
  The TPO kept a comparable with an abnormal profit margin. Can I get it excluded just for that?
  No, not on the margin alone. A company that otherwise satisfies Rule 10B(2) is not excluded merely because it presents a peculiar feature such as a huge profit or a huge turnover. What the high margin does is trigger an enquiry: the officer must ask whether it flows from a comparability defect that materially affects price or profit, and if it does, attempt to eliminate the difference under Rule 10B(3) — exclusion follows only if that cannot be done.
• CIT v Cotton Naturals (I) P Ltd High CourtHelps taxpayer
  I lent dollars to my overseas subsidiary — must the arm's length interest be benchmarked against Indian lending rates because I am the Indian lender?
  No. The Delhi High Court held on 27 March 2015 that the arm's length interest on a loan to an associated enterprise is the market determined rate for the currency in which the loan is to be repaid, not the rate prevailing in the country of residence of either party. The loan here was advanced and repayable in US dollars, so Indian prime lending rates were irrelevant; interest rates on rupee loans reflect the Reserve Bank's policy and say nothing about a dollar debt. The 4 per cent charged by the assessee was upheld, the adjustment to 12.20 per cent set aside, and the same parameters were held to apply to inbound and outbound loans alike.
• Sony Ericsson Mobile Communications India P Ltd v CIT High CourtCuts both waysUnder appeal
  The TPO says my advertising spend is higher than comparables and has added the excess as brand building for my foreign parent. Can he do that?
  Not by that route. The bright line test — treating advertising, marketing and promotion spend above a comparable's level as a separate transaction of brand building for the foreign associated enterprise — has no statutory mandate, and the parameters the Special Bench laid down in L.G. Electronics do not bind either side. The Delhi High Court set the Tribunal's approach aside as based on an erroneous legal standard and sent the matters back for fresh consideration.
• CIT v Cushman and Wakefield (India) P Ltd High CourtCuts both ways
  The Transfer Pricing Officer says my group companies gave me no benefit and has put the arm's length price at nil. Can he decide that, and can the Assessing Officer still disallow the payment after the reference?
  It depends on who is deciding what. The Delhi High Court held that the jurisdictions are distinct. The Transfer Pricing Officer determines the arm's length price of the referred transaction, and may find it to be nil if a comparable independent entity would pay nothing, but he cannot decide whether services were rendered or whether a benefit accrued - that is disallowance, and it belongs to the Assessing Officer under section 37. Equally, a reference to the Transfer Pricing Officer does not concede the deduction: the Assessing Officer can still verify whether the transactions are real, though he is bound by the arm's length price the Transfer Pricing Officer has approved. Both findings of the Tribunal were set aside and the matter remanded.
• Li & Fung India Pvt Ltd v CIT High CourtHelps taxpayer
  I run a captive sourcing arm paid cost plus 5 per cent. The TPO has ignored my cost base and applied a mark-up to the FOB value of the goods my group company sources through me. Can he do that?
  No. The Delhi High Court held that broad-basing the profit determining denominator to the entire free-on-board value of contracts entered into by the associated enterprise is contrary to the Act and the Rules. The exercise finds no mention in either. The Transfer Pricing Officer had not disturbed the comparables or the method, and had shown neither how the Indian company bore significant risk nor what locational advantage the associated enterprise enjoyed. Findings of "significant risk" and "functional risk" cannot rest on vague generalities. The addition of Rs.57.65 crore was deleted and the Tribunal's order set aside.
• CIT v Agnity India Technologies P Ltd High CourtHelps taxpayer
  The Transfer Pricing Officer has put Infosys into my comparables. I am a small captive software unit working only for my parent - can I get it thrown out?
  Yes. The Delhi High Court upheld the Tribunal's exclusion of Infosys Technologies Ltd from the comparable set of a captive software developer. Infosys was a giant with Rs.9,028 crore of revenue against the assessee's Rs.16.09 crore, it bore full entrepreneurial risk, owned branded products, spent heavily on advertising and research, and delivered half its work onsite. The assessee was a risk-free captive doing only offshore contract development for its parent. With Infosys and Satyam out, the one surviving comparable gave 11.11%, below the assessee's own 17% margin. No substantial question of law arose and the Revenue's appeal was dismissed.
• CIT v EKL Appliances Ltd High CourtHelps taxpayer
  The Transfer Pricing Officer says our royalty to the parent is worth nil because we have been making losses for years — can he wipe out the whole payment?
  No. The Delhi High Court held on 29 March 2012 that a Transfer Pricing Officer must price the transaction the associated enterprises actually entered into, not decide whether they should have entered into it. Rule 10B(1)(a) does not authorise disallowance because the expenditure was unnecessary, imprudent or unremunerative, or because the assessee kept making losses. The quantum can be examined, but wholesale disallowance on that reasoning is not contemplated. The OECD guidelines allow a transaction to be recharacterised only in two exceptional cases, and neither applied. Brand fee of Rs.3,42,97,940 and Rs.3,99,51,000 for the two years was restored to the assessee.
• Tetra Pak India Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  My APA has expired. The TPO now wants to benchmark an open year against the margin agreed in it. Can he?
  No. The Pune Bench held that comparing the operating profit margin agreed in an advance pricing agreement covering assessment years 2014-15 to 2018-19 with the actual operating margin earned in assessment year 2020-21, which is not a covered year of that agreement, is inappropriate and against the provisions of the Act. Section 92CC(4) read with sub-section (9A) confines an agreement to the years specified in it, and the confinement runs against the department as much as against the assessee. The issue was restored to the Assessing Officer and the TPO and the appeal was partly allowed.
• Noida Towers Private Limited v DCIT ITATHelps taxpayerNo later treatment found
  I already disallowed the whole of the interest paid to my associated enterprise under s.94B in my own computation. The TPO has still made a transfer pricing adjustment on the same interest. Can he?
  Not on these facts. Where the assessee had itself added back the entire interest paid to its associated enterprises on non-convertible debentures under s.94B in its computation of income and paid tax on it, the Tribunal held that a further disallowance out of the same interest by way of a transfer pricing adjustment would amount to double taxation of the same income and was not permissible, and it directed the adjustment to be deleted.
• Beauty Etoile Private Limited v Assessment Unit ITATHelps taxpayerNo later treatment found
  The TPO has used the 30 per cent EBITDA cap in s.94B as his benchmarking method and has applied it to interest I capitalised to work in progress rather than claimed. Can he do either?
  Neither. Section 94B is a restriction on the deduction of interest, not a method of determining an arm's length price, and it cannot be imported into the 'other method' under Rule 10AB, which requires a price charged or paid in an uncontrolled transaction with or between non-associated enterprises. And s.94B bites only on interest which is deductible in computing business income, so interest capitalised to work in progress and not claimed as a deduction in the year cannot be brought into the disallowance at all.
• SP Imperial Star Private Limited v National Faceless Assessment Centre ITATCuts both waysUnder appeal
  The Transfer Pricing Officer has treated all the lenders named in my Form 3CEB as associated enterprises and applied section 94B to the whole interest. Can I still show that two of them are not associated enterprises?
  Yes. The Tribunal held that the first and foremost criterion for invoking section 94B is to identify whether the enterprise is an associated enterprise or a deemed associated enterprise, and that question must be settled before any arm's length or thin capitalisation computation is made. It remanded the matter for the disallowance to be recomputed on the basis of the revised Form 3CEB, holding that the statute prescribes no time limit for filing that form.
• VVF (India) Limited v NFAC — the secondary adjustment on a corporate guarantee deleted in the same order that sent the guarantee fee itself back to the TPO, and Rule 10CB's interest clock identified as running from the s.139(1) due date ITATHelps taxpayerNo later treatment found
  The TPO has fixed a guarantee commission rate I dispute AND imputed interest on the delay as a secondary adjustment. Can the secondary adjustment stand while the underlying rate is still being fought over?
  The ITAT Mumbai deleted it. On 14 February 2025, for assessment year 2020-21, the Tribunal remitted the corporate guarantee adjustment itself to the Assessing Officer and Transfer Pricing Officer for fresh adjudication in the light of the OECD's February 2020 report on the transfer pricing of financial transactions, holding that the Transfer Pricing Officer's use of external bank guarantee rates with a discount was "not in accordance with the transfer pricing principles". In the very next paragraph it dealt with the secondary adjustment separately and allowed the ground, noting "that as per rule 10CB computation of interest commences from the due date of filing the return of income" and that for the year under consideration that due date was 15 February 2021, and concluding that it did "not find any basis for making the secondary adjustment for the year under consideration". The appeal was partly allowed for statistical purposes.
• Mando Automotive India Pvt Ltd v ACIT ITATCuts both waysNo later treatment found
  Your MAP resolution settles the transactions with the treaty-country associated enterprise. Can the same treatment be claimed for your associated enterprises in other countries?
  Not automatically, but the claim is arguable and the Tribunal will not shut it out. The Chennai Bench restored the adjustment on the transactions with the non-Korean associated enterprises to the Transfer Pricing Officer to examine whether they are similar in nature to those covered by the India-Korea MAP resolution, and, if they are found to be so, to consider giving them the same treatment as adopted in the MAP. The relief is a remand on a similarity test, not a direction to apply the agreed margin.
• STEAG Energy Services (India) P Ltd v ACIT ITATHelps taxpayerJudgment not reachable
  Only a small adjustment survived my appeal. Does the tolerance band wipe it out completely?
  Yes, if the surviving variation is within the notified percentage of the transaction value. The proviso to s.92C(2) is a deeming provision: once the variation is inside the band, the price actually charged is taken to be the arm's length price and there is nothing left to adjust.
• Aker Powergas Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  Your APA with the Board covers later years only. Can you use it to settle the transfer pricing in an earlier year that is still open?
  Not as of right, but it is not to be ignored either. Where the transfer pricing issues are identical and the business model has not changed between the year under appeal and the later years covered by the APA, the Mumbai Bench held the APA has persuasive value and the principle it lays down for benchmarking has guidance value for the earlier year. The relief obtained is a remand: the matter goes back to the TPO to decide afresh in the light of the APA.
• Barracuda Networks India Pvt Ltd v DCIT ITATHelps taxpayer
  The TPO has taken a three-year weighted average margin for a comparable under Rule 10CA, but the company fails my turnover filter in the two earlier years. Must those years still go into the weighted average?
  No. The Tribunal held that the provisos to Rule 10CA(2) must be read harmoniously with Rule 10B(3) and the proviso to Rule 10B(4), and that where a filter makes an enterprise non-comparable in the earlier two years, the data for those years can have no influence on the determination of transfer prices for the current year and must be ignored. On the facts, if R.S. Software (India) Ltd. was to be a comparable at all, its margins for the two earlier years had to be dropped, because in those years its turnover exceeded Rs 200 crores and it was not comparable.
• Sun Pharmaceutical Industries Ltd v ACIT ITATHelps taxpayerNo later treatment found
  Your APA for a later year accepts the foreign associated enterprise as the tested party. Can the TPO still make you the tested party in an open earlier year?
  Not without the question being looked at again on the APA's basis. Following the Ahmedabad Bench's order in the assessee's own group for assessment year 2009-10, this Bench took the same view and restored the tested party issue to the Transfer Pricing Officer for fresh adjudication treating the associated enterprises as the tested party. The ground was allowed for statistical purposes.
• Metal One Corporation India Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  Your APA was concluded after the appeal was filed. Can you raise it as a fresh ground before the Tribunal for an earlier year, and does it dispose of the comparables fight?
  Yes on both. The Delhi Bench admitted an additional ground raising the APA as a legal issue and held that once an APA has been concluded in the assessee's own case, the same approach and basis are to be adopted for the assessment year before it, where the facts, the law and the FAR are similar. Having allowed that ground, the Bench found it unnecessary to decide the comparability disputes on merits.
• Ranbaxy Laboratories Ltd v DCIT ITATHelps taxpayer
  Your APA has no rollback for the year under appeal. Can you still make the TPO benchmark that year on the APA's method and tested party?
  On this order, yes. The Bench held that although the APA signed for assessment year 2014-15 carried no rollback for the years in appeal, the principles it laid down for comparability analysis have persuasive value, and it drew support from Rule 10MA in applying the methodology accepted in the APA to the year in appeal. It held that the foreign associated enterprises, accepted as the tested party in the APA, were to be the tested party for the year in appeal too, and remitted the computation to the TPO with a direction to give due weight to the APA on the other issues as well.
• In re Morgan Stanley and Co. Inc. Advance RulingCuts both waysPartly overruled — read this first
  Our Indian subsidiary does back-office work for us and we pay it cost plus a mark-up, and we send some of our own people over. Is the subsidiary our permanent establishment, and can the Revenue attribute anything more to us once the subsidiary has been paid an arm's length price?
  It depends on which limb. The Authority ruled that Morgan Stanley Advantage Services was not a fixed-place permanent establishment of Morgan Stanley & Co. Inc., because the US company did not carry on its business through MSAS's premises, and not an agency permanent establishment, because MSAS could not conclude contracts, held no stock and secured no orders. But it would be a service permanent establishment under article 5(2)(l) if employees were sent to India for more than 90 days, whether for stewardship or on deputation. On attribution, once MSAS was remunerated at arm's length no further income could be attributed to the permanent establishment. The ruling binds only that applicant.
• Statutory position — s.144C(15)(b): who is an "eligible assessee", the two limbs, and the substitution by Act No. 12 of 2020 with effect from 1 April 2020 that brought in every non-resident not being a company CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer has forwarded a draft order to our partnership firm, which is non-resident but is not a company, and there is no Transfer Pricing Officer's order in the case. Is the firm an eligible assessee at all, and does it matter which assessment year we are in?
  It matters a great deal which year you are in. As s.144C(15)(b) stands on the departmental edition stamped Year 2025 it reads: "(b) 'eligible assessee' means,— (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company:". Sub-clause (ii) in that form was substituted by Act No. 12 of 2020 with effect from 1 April 2020 — footnote 97 on the departmental edition stamped Year 2021 reads verbatim "Sub. by the Act No. 12 of 2020, w.e.f. 1-4-2020.", and footnote 91 on the Year 2022 edition repeats it. Before that substitution, and as printed on the editions stamped Year 2009 and Year 2019 (No. 2), sub-clause (ii) read simply "any foreign company". So a non-resident firm, a non-resident individual, a non-resident association of persons — any non-resident that is not a company — became an eligible assessee in its own right on 1 April 2020 and was not one before, unless it was brought in by limb (i). Limb (i) is independent of status: it catches ANY person, resident or not, company or not, where the variation in sub-section (1) arises as a consequence of an order of the Transfer Pricing Officer under s.92CA(3). Two things were added with effect from 1 September 2024 by Act No. 15 of 2024: a proviso to clause (b) reading "Provided that such eligible assessee shall not include person referred to in sub-section (1) of section 158BA or other person referred to in section 158BD.", and s.144C(16), "The provisions of this section shall not apply to any proceedings under Chapter XIV-B."
• Statutory position — s.92BA: clause (i) was OMITTED with effect from 1 April 2017, so a s.40A(2)(b) payment is no longer a specified domestic transaction — what survives, the twenty crore threshold, and clause (va) added for s.115BAB companies CBDT Circulars & InstructionsCuts both ways
  The TPO has been asked to benchmark our payments to related parties under s.40A(2)(b). Is that still a specified domestic transaction at all?
  No. Clause (i) of s.92BA — "any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A" — was OMITTED by Act No. 7 of 2017 with effect from 1 April 2017, and the omitted words are set out in an amendment footnote, so there is no doubt what went. What survives is: clause (ii), any transaction referred to in s.80A; clause (iii), any transfer of goods or services referred to in s.80-IA(8); clause (iv), any business transacted between the assessee and another person as referred to in s.80-IA(10); clause (v), any transaction referred to in any other section under Chapter VI-A or s.10AA to which s.80-IA(8) or (10) applies; clause (va), any business transacted between the persons referred to in s.115BAB(6), inserted by Act No. 46 of 2019 with effect from 1 April 2020; and clause (vi), any other transaction as may be prescribed. The whole definition applies only "where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of twenty crore rupees" — the word "twenty" having been substituted for "five" by the Finance Act, 2015 with effect from 1 April 2016.
• Statutory position — rule 10CA: the dataset, the arm's length range from the thirty-fifth to the sixty-fifth percentile where there are six or more entries, the median where the price falls outside it, and the arithmetical mean under sub-rule (7) where there are fewer than six CBDT Circulars & InstructionsCuts both ways
  The Transfer Pricing Officer has rejected our margin and adopted the median of his comparables. When is he entitled to go to the median at all, how is the range built, and what happens if he is left with only four or five comparables?
  The range is built only where the dataset has six or more entries and the most appropriate method is not the profit split method or the other method. Rule 10CA(2) requires a dataset constructed by placing the prices in ascending order. Rule 10CA(4) then provides that where the most appropriate method applied is a method other than the method referred to in clause (d) or clause (f) of s.92C(1) and the dataset consists of six or more entries, "an arm's length range beginning from the thirty-fifth percentile of the dataset and ending on the sixty-fifth percentile of the dataset shall be constructed". Rule 10CA(5): if the price actually charged is within that range it "shall be deemed to be the arm's length price" — no adjustment. Rule 10CA(6): if it is outside the range, "the arm's length price shall be taken to be the median of the dataset". The median is therefore reached only on the footing that the range was properly constructed and the price fell outside it; there is no route to the median in a case where sub-rule (4) never applied. Where sub-rule (4) does not apply — fewer than six entries, or the profit split method or the other method — sub-rule (7) revives the older machinery: the arm's length price is the arithmetical mean of all the values in the dataset, subject to the proviso that if the variation does not exceed such percentage not exceeding three per cent as may be notified, the price actually charged is deemed to be the arm's length price. The thirty-fifth percentile, the sixty-fifth percentile and the median are all defined in sub-rule (8) on the same pattern, and the pattern is not the ordinary statistical one: each is the LOWEST value in the ascending dataset such that at least thirty-five, sixty-five or fifty per cent of the values are equal to or less than that value, with a proviso that if the number of values equal to or less than that value is a whole number, the percentile is the arithmetic mean of that value and the value immediately succeeding it.
• Statutory position — rule 10B(1)(e) and rule 10B(3): how the transactional net margin method is applied, and the second limb of rule 10B(3) under which reasonably accurate adjustments to eliminate the material effects of differences are the statutory basis for working capital and risk adjustments CBDT Circulars & InstructionsCuts both ways
  The Transfer Pricing Officer has refused our working capital adjustment on the ground that no rule provides for it. Where in the Rules does the right to a working capital or risk adjustment come from, and does anything prescribe how it is computed?
  The right comes from rule 10B(3)(ii), read with rule 10B(1)(e)(iii); nothing in the Rules prescribes how either adjustment is computed. Rule 10B(3) is in two limbs and the word between them is "or": an uncontrolled transaction is comparable to an international transaction or a specified domestic transaction if "(i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences." So a comparable is not disqualified by a material difference. It is disqualified only if the difference is material AND no reasonably accurate adjustment can be made for it. That second limb is the statutory basis for the working capital adjustment and the risk adjustment, and an officer who refuses an adjustment must, to be consistent, either say the difference is not material — in which case limb (i) is satisfied and the comparable stands unadjusted — or say the adjustment proposed is not reasonably accurate, which is a question of the assessee's computation and not of the existence of the power. Rule 10B(1)(e) carries the same idea inside the transactional net margin method itself: sub-clause (iii) requires that the net profit margin arising in comparable uncontrolled transactions "is adjusted to take into account the differences, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market". On the words of sub-clause (iii) the adjustment is mandatory, not discretionary. What the Rules do not do is prescribe a method. Rule 10B, rule 10C and rule 10CA have all been read in full and none of them prescribes a formula, a base or a rate for computing a working capital adjustment or a risk adjustment.
• Statutory position — rule 10B(3): the Income-tax Rules expressly contemplate a comparability adjustment and prescribe NO method for computing one — a proved negative across rules 10A, 10AB, 10B, 10C, 10CA, 10D and 10TA and s.92F, with nothing in any CBDT circular, instruction or departmental transfer pricing page either CBDT Circulars & InstructionsCuts both ways
  The Transfer Pricing Officer has thrown out my working capital adjustment saying there is no prescribed method for it. Is he right that there is no prescribed method, and if he is, what does that do to the claim?
  He is right on the first half and wrong on the second. No provision of the Income-tax Rules, 1962 prescribes a formula, a base, a period, a source of interest rates or any other method for computing a working capital adjustment or a risk adjustment. Rules 10A, 10AB, 10B, 10C, 10CA, 10D and 10TA have each been read in full, and s.92F, and none of them does. But the absence of a method is not the absence of a power. Rule 10B(3) reads: "An uncontrolled transaction shall be comparable to an international transaction or a specified domestic transaction if— (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences." The two limbs are joined by "or", and limb (ii) is an express statutory contemplation of the adjustment. Rule 10B(1)(e)(iii) goes further inside the net margin method itself: the net profit margin arising in comparable uncontrolled transactions "is adjusted to take into account the differences, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market" — the words are "is adjusted", not "may be adjusted". Rule 10C(2)(e) makes "the extent to which reliable and accurate adjustments can be made to account for differences" a statutory factor in selecting the most appropriate method, and rule 10D(1)(j) and (l) require the assessee to keep a record of "adjustments, if any, which were made to account for differences" and "details of the adjustments, if any, made to transfer prices". So the Rules name the adjustment four times over and never once say how to work it out. The expression "reasonably accurate" is not defined anywhere that has been found: not in rule 10A, which is the definitions rule for rules 10A to 10E, and not in s.92F, which is the definitions section for ss.92 to 92E.
• Statutory position — s.3 of the Black Money Act: the charge at thirty per cent, the proviso to s.3(1) that fixes the year of charge for an undisclosed foreign asset, and what ss.4 and 5 bring in and refuse to take out CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  The department has issued a Black Money Act notice for a foreign bank account opened in 2007. The Act only came into force in 2015. On what does the charge on that asset actually rest, and in which year is it charged?
  On s.3(1) and its proviso. The Act came into force on 1 July 2015 (s.1(3): "Save as otherwise provided in this Act, it shall come into force on the 1st day of July, 2015"). Section 3(1) charges tax "on every assessee for every assessment year commencing on or after the 1st day of April, 2016 ... in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset". The proviso to s.3(1) is the provision that matters for an old asset: "Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer." So the year of charge for an asset is not the year of acquisition but the year of coming to notice, and s.3(2) defines the "value of an undisclosed asset" as its fair market value determined in the prescribed manner. Section 4(1) puts three things into the total: (a) undisclosed income from a source outside India, (b) income from a source outside India where a return was required under s.139 of the Income-tax Act and none was furnished in time, and (c) the value of an undisclosed asset located outside India. Section 4(2) keeps out of the total any variation made under ss.29 to 43C, ss.57 to 59 or s.92C of the Income-tax Act, and s.4(3) keeps what is charged here out of total income under that Act. Section 5(1)(i) forbids any deduction for expenditure or allowance and any set off of loss, "whether or not it is allowable in accordance with the provisions of the Income-tax Act"; s.5(1)(ii) allows one reduction only — income already assessed or assessable under the Income-tax Act or under this Act is reduced from the value of the undisclosed asset if the assessee furnishes evidence to the Assessing Officer's satisfaction that the asset was acquired from that income — and s.5(2) prorates that reduction for immovable property.
• Statutory position — s.92C(2): the second proviso tolerance band, and the third proviso which disapplies the first and second provisos for any international transaction or specified domestic transaction undertaken on or after 1 April 2014 CBDT Circulars & InstructionsCuts both ways
  The Transfer Pricing Officer's adjustment is within three per cent of our price. Can I still claim the tolerance band under the proviso to s.92C(2), or has that gone?
  For a transaction undertaken on or after 1 April 2014 the second proviso does not apply, because the third proviso disapplies it — but the band itself has not gone. It has moved into rule 10CA(7) and it now operates only where the arm's length range machinery does not. The third proviso to s.92C(2) reads: "Provided also that where more than one price is determined by the most appropriate method, the arm's length price in relation to an international transaction or specified domestic transaction undertaken on or after the 1st day of April, 2014, shall be computed in such manner as may be prescribed and accordingly the first and second proviso shall not apply." The first proviso was the arithmetical mean rule; the second was the tolerance band — variation not exceeding such percentage not exceeding three per cent of the transaction price as may be notified, in which case the transaction price is deemed to be the arm's length price. The prescribed manner is rule 10CA. Where rule 10CA(4) applies, six or more entries and a method other than profit split or the other method, the answer is the range and there is no band at all: within the range the price is deemed to be the arm's length price under rule 10CA(5), outside it the arm's length price is the median under rule 10CA(6). Where rule 10CA(4) does not apply, rule 10CA(7) gives the arithmetical mean and carries its own proviso in the same words as the old second proviso, and it is under that proviso, read with the third proviso to s.92C(2), that the band is now notified. The current notification is Notification No. 157/2025 dated 6 November 2025, S.O. 5053(E), issued expressly under "the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961, read with the proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962", and it fixes the variation at one per cent of the transaction price in respect of wholesale trading and three per cent in all other cases, for assessment year 2025-2026.
• Statutory position — section 94A: the consequences of dealing with a person located in a notified jurisdictional area, and whether any area is notified today CBDT Circulars & InstructionsCuts both ways
  My client is remitting money to a company in a low-tax jurisdiction. Does section 94A apply, and is any country actually notified as a notified jurisdictional area at the moment?
  Section 94A lets the Central Government notify a country or territory as a notified jurisdictional area having regard to the lack of effective exchange of information, and once notified the consequences are severe and automatic: all parties to a transaction with a person located there are deemed associated enterprises, the transaction is deemed an international transaction so the entire transfer-pricing machinery applies, deductions are barred unless prescribed authorisations and documents are furnished, unexplained receipts from such a person are deemed to be income, and withholding is at the highest of the rate in force, the rate in the relevant provision and thirty per cent. The only notification under section 94A(1) that could be located was Notification No. 86/2013 notifying Cyprus, and it was rescinded by Notification No. 114/2016 with retrospective effect from 1 November 2013. No subsisting notification was found and no departmental list of notified jurisdictional areas could be opened, so nothing here certifies that no jurisdiction is notified today — section 94A should be neither treated as live against a jurisdiction nor written off as a dead letter without checking the current list.
• PCIT v Softbrands India Pvt Ltd High CourtCuts both waysOverruled
  The Tribunal excluded some comparables in my transfer pricing case. Can the department take that to the High Court as a question of law?
  Not without showing perversity. The Karnataka High Court dismissed the Revenue's appeal, holding that no substantial question of law arises where the dispute is about whether comparables were rightly picked or filters rightly applied. Following its own judgment of 25 June 2018 in the same assessee's case, it held that unless ex facie perversity in the Tribunal's findings is established, an appeal under section 260A does not lie, at the instance of either side. Mere dissatisfaction with the Tribunal's findings of fact is not a sufficient reason to invoke section 260A. The appeal was dismissed with no order as to costs.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.