Section 92CC

Section 92CC — the law in short

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

• PCIT (IT)-2 Mumbai v Gemological Institute of America Inc High CourtHelps taxpayerNo later treatment found
  An APA between your Indian company and the CBDT fixes the royalty. The officer says the second proviso to s.92C(4) still stops the foreign parent, who did not sign the APA, from being taxed on the reduced figure. Does it?
  No, on this Bench's reasoning. Where an APA has been entered into between the Indian associated enterprise and the CBDT, that agreement governs the determination of the arm's length price for every year it covers, and the price falls to be determined solely on the basis of the APA. The second proviso to s.92C(4) is confined to the case where the Assessing Officer determines the arm's length price under s.92C(3); it does not reach a variation made pursuant to an APA.
• Deloitte Consulting India Pvt Ltd v Assessment Unit, NFAC High CourtHelps taxpayerNo later treatment found
  Your APA year has been reopened and the officer has himself re-examined whether you complied with the APA. Can he do that without a compliance audit by the Transfer Pricing Officer?
  No. Rule 10P places the compliance audit of an APA with the Transfer Pricing Officer having jurisdiction over the assessee, for each year covered by the agreement. The assessment unit had no jurisdiction to examine APA compliance on its own or to make a reassessment on that footing, and the addition of Rs 106,47,00,730 it made on that basis was beyond jurisdiction. The reopening failed independently on the s.151 sanction and because the notice was issued by the jurisdictional officer rather than the faceless assessing officer.
• PCIT-2 v EYGBS (India) Pvt Ltd High CourtHelps taxpayer
  Your client offered a transfer pricing adjustment itself because its APA required it. The officer says s.92C(4) bars the s.10AA exemption on that extra income. Is he right?
  No. Where the assessee computes the arm's length price itself pursuant to an APA entered into with the CBDT, none of the conditions in s.92C(3) is attracted, and s.92C(4) therefore never comes into operation at all. The bar in s.92C(4) is aimed at income by which the Assessing Officer enhances the declared total income, not at figures the assessee has itself declared in conformity with its APA. The Revenue's appeals were dismissed.
• Optum Global Solutions India Pvt Ltd v PCIT High CourtHelps taxpayerNo later treatment found
  You signed an APA and filed a modified return under s.92CD. The Commissioner has now issued a s.263 notice on the old assessment order. Can he?
  Not on this reasoning. Once a modified return is filed under the APA it has to be treated as a return filed under s.139, and the earlier return and earlier assessment order lose their efficacy for all practical purposes; a fresh assessment order is what has to be passed. Allowing the s.263 notice on the superseded order to run would make the APA and the modified return inconsequential, and nothing stops the Assessing Officer from taking the very same points while re-scrutinising the modified return. Both writ petitions were allowed and the show cause notices set aside.
• 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.
• Vestas Wind Technology India P Ltd v ITO ITATHelps taxpayerNo later treatment found
  The AO disallowed interest paid to my foreign parent under s.94B. Does the treaty help?
  It did here. Section 94B restricts deduction only where the lender is a non-resident associated enterprise and not where the lender is domestic, which the Tribunal held is discrimination caught by Article 24(4) of the India-Denmark treaty; the treaty prevailed and the entire disallowance was deleted, including the amount the assessee had disallowed itself.
• Sprinklr India P. Ltd. v DCIT ITATHelps taxpayerNo later treatment found
  My APA application is still pending and its rollback period covers the very year under appeal. Is that any answer to the recovery notice?
  Yes, it is a ground for stay. Where the year under appeal falls within the rollback period of a pending APA application, the outcome of the APA proceeding has a direct bearing on that year, and the Tribunal will stay the balance of the demand. Here, with 20 per cent already deposited, the balance of Rs. 6,72,38,488 was stayed for 180 days or until disposal of the appeal, whichever is earlier.
• Unilever Industries P. Ltd. v ACIT ITATHelps taxpayerNo later treatment found
  A bilateral APA signed years after the assessment fixes my margin for a run of years and MAP has settled the rest. What do I do with the appeals still pending for those years, and do my other grounds go with them?
  The transfer pricing grounds go, the rest stay. Where a bilateral APA executed with both revenue authorities fixes the arm's length margin for the years under appeal and the MAP proceedings have been settled, the Tribunal allows the assessee to withdraw its transfer pricing grounds in compliance with Rule 44G and dismisses the Revenue's transfer pricing grounds as settled. The corporate tax grounds are decided on their merits in the same order.
• 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.
• 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.
• Dell International Services India Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  You offered extra income to give effect to a MAP resolution. The officer says the proviso denying a Chapter III deduction on enhanced income applies. Does it?
  No, on this Bench's view. The proviso applies only to a transfer pricing adjustment made by the Assessing Officer. It does not reach income enhanced under a mutual agreement procedure resolution, which is one of several distinct modes by which an arm's length price can come to be determined, and where the assessee actually invoices its associated enterprise and brings the foreign exchange in.
• Dar Al Handasah Consultants (Shair & Partners) India Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  I signed an APA with rollback and filed a modified return under s.92CD offering additional income. The officer says the proviso to s.92C(4) bars any Chapter III deduction on that extra income. Is he right?
  He is not. The proviso to s.92C(4) bars a s.10A deduction on income by which the total income is ENHANCED by a transfer pricing addition made by the authorities; income the assessee itself offers in a modified return under the APA is not such an addition. Section 92CD(2) then supplies the positive answer: save as otherwise provided in that section, all other provisions of the Act apply as if the modified return were a return under s.139, so any deduction otherwise available applies to the income offered in the modified return.
• 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.
• Statutory position — s.92CE(1): the FIVE gateways into a secondary adjustment, the one crore threshold, the AY 2016-17 cut-off, and the word "and" that was retrospectively replaced by "or" CBDT Circulars & InstructionsCuts both ways
  The TPO's order says I must now make a secondary adjustment. Which primary adjustments actually trigger s.92CE, and is there any threshold or year below which the section simply does not apply to me?
  Section 92CE(1) is triggered by a primary adjustment to transfer price arising in any one of FIVE ways — made suo motu by the assessee in his return; made by the Assessing Officer and accepted by the assessee; determined by an advance pricing agreement entered into under s.92CC on or after 1 April 2017; made under the safe harbour rules framed under s.92CB; or arising from a resolution under the mutual agreement procedure under an agreement entered into under s.90 or s.90A. In any of those cases "the assessee shall make a secondary adjustment". The first proviso then takes the case out of the section altogether if EITHER (i) the amount of primary adjustment made in any previous year does not exceed one crore rupees, OR (ii) the primary adjustment is made in respect of an assessment year commencing on or before 1 April 2016. The word joining those two limbs was originally "and"; it was substituted by "or" by Act No. 23 of 2019 with retrospective effect from 1 April 2018, and that single word is what makes the exclusions workable.
• Statutory position — Rule 10CB: the five different starting points for the ninety-day repatriation clock, and the two SEPARATE interest rate bases — SBI one-year MCLR plus 325 basis points for a rupee transaction, six-month LIBOR plus 300 basis points for a foreign-currency one CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My primary adjustment stands and the money is still with my overseas associated enterprise. When exactly do my ninety days start, and at what rate is the deemed advance to be charged interest?
  Rule 10CB(1) gives the repatriation window as "on or before ninety days" from a starting point that differs with the source of the primary adjustment: from the s.139(1) due date where the adjustment was made suo motu in the return; from the date of the order of the Assessing Officer or the appellate authority where the adjustment in that order was accepted; where the adjustment is determined by an APA, from the date of filing the s.139(1) return if the APA was entered into on or before the due date, and from the END OF THE MONTH in which the APA was entered into if it came later; from the s.139(1) due date where the safe harbour option was exercised; and from the date the Assessing Officer gives effect under rule 44H to a mutual agreement procedure resolution. Rule 10CB(2) then fixes two different rate bases, and they are not interchangeable: for a transaction denominated in INDIAN RUPEES the imputed per annum interest is "at the one year marginal cost of fund lending rate of State Bank of India as on 1st of April of the relevant previous year plus three hundred twenty five basis points"; for a transaction denominated in FOREIGN CURRENCY it is "at six month London Interbank Offered Rate as on 30th September of the relevant previous year plus three hundred basis points". Clause (ii) still names LIBOR. LIBOR settings have been permanently discontinued and no replacement benchmark has been substituted into this rule, so for recent previous years the foreign-currency limb prescribes a rate that may not exist for 30 September of the relevant year.
• CBDT Circular No. 10/2015 — APA rollback CBDT Circulars & InstructionsCuts both waysNo later treatment found
  I want the four rollback years with my APA. Can I pick only the years that help me, and what will knock rollback out before I start?
  You cannot pick and choose: the applicant has to either apply for all the four years or not apply at all, subject only to the transaction not existing in a year or the rollback conditions failing in a year. Rollback is not available for a year in which the return was filed under s.139(4), nor where the Tribunal has finally disposed of the appeal on the arm's length price of that transaction, and it can never reduce the total income or increase the loss declared in the return.
• s.92CC(4) — the five-year APA term and the year outside it CBDT Circulars & InstructionsCuts both ways
  My advance pricing agreement covers five years. What about the year just outside it - can the agreed margin be held against me, or held to my benefit, for that year?
  Section 92CC(4) caps the agreement at such period not exceeding five consecutive previous years as may be specified in it, and s.92CC(3) gives the agreement its force only "in respect of which the advance pricing agreement has been entered into". Sub-section (9A) extends that backwards, but only so far: an agreement may, subject to prescribed conditions, determine the arm's length price or the attributable income for any period not exceeding four previous years preceding the first of the years covered by sub-section (4), and rule 10F(ha) calls those the rollback years. A year outside the five plus four is outside the agreement, and the Pune Bench has held in Tetra Pak India that the window works against the department too: the TPO may not benchmark an uncovered year against the margin agreed in the APA.
• s.92CC(7) to (9) — APA declared void ab initio CBDT Circulars & InstructionsHelps department
  The Board says my advance pricing agreement was obtained by misrepresentation. What can it actually do, and what happens to the years the agreement covered?
  Section 92CC(7) allows the Board, with the approval of the Central Government, to declare an advance pricing agreement void ab initio by an order, on one ground and one ground only — that the agreement was obtained by the person by fraud or misrepresentation of facts. Section 92CC(8) then applies the Act to him as if the agreement had never been entered into, and takes the whole stretch between the date of the agreement and the date of the s.92CC(7) order out of every period of limitation in the Act, with a proviso lifting whatever is left to sixty days. Rule 10R(6) requires the order declaring the agreement void to be in writing and to give reasons, including reasons for not accepting the assessee's submissions.
• Form 3CED — a defective or late APA application CBDT Circulars & InstructionsCuts both ways
  Do I have to go through a pre-filing consultation before I file Form 3CED, and what happens if the application is defective or goes in late?
  Since 14 March 2015 pre-filing consultation is optional: rule 10-I(1) now lets any person referred to in rule 10G apply in Form No. 3CED, where before that date it was confined to a person who had been through a pre-filing consultation under rule 10H. A defect in the application is not fatal by itself — rule 10K requires a deficiency letter within one month of receipt, gives the applicant fifteen days to cure, extendable to a total of thirty, and only then allows an order that the application shall not be proceeded with, which cannot be passed without a hearing and which carries a refund of the fee. Timing is a different matter: rule 10-I(3) fixes when the application must be made and no provision for extending it appears in these rules.
• Rule 10Q and Rule 10R — revision and cancellation of an APA CBDT Circulars & InstructionsCuts both ways
  The Board wants to revise, or to cancel, my advance pricing agreement. On what grounds can it, and what am I entitled to before it does?
  Rule 10Q allows the Board to revise a concluded agreement on three grounds — a change in critical assumptions or failure to meet a condition, a change in law that modifies a matter covered by the agreement without making it non-binding, and a request from the competent authority of the other country in a bilateral or multilateral case. Except where the assessee himself asked for the revision, the agreement cannot be revised unless he has been heard and is in agreement with the proposed revision; if he is not, Rule 10Q(4) sends the matter to cancellation under Rule 10R. Rule 10R lists four cancellation grounds, requires an opportunity of being heard, and requires a written order giving reasons and specifying the date from which the cancellation takes effect.

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.