Section 92E

Section 92E — the law in short

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

• Times Global Broadcasting Company Ltd v Union of India High CourtHelps taxpayerSuperseded by amendment
  The TPO has adjusted a domestic transaction that the Assessing Officer never referred to him and that I never reported in Form 3CEB. Did he have jurisdiction?
  On the law as it stood, no. The Bombay High Court held that s.92CA(2A) and s.92CA(2B), which let the TPO take up a transaction not referred to him and a transaction not reported under s.92E, spoke only of international transactions; specified domestic transactions were conspicuously absent. For a specified domestic transaction the TPO could therefore study only what the Assessing Officer had referred, and the adjustment of Rs 57.54 crores on the demerger creditors was quashed. CAUTION: that gap has since been closed. Both sub-sections were amended by Act No. 15 of 2024 with effect from 1 April 2025 to cover specified domestic transactions as well.
• 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.
• 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.
• Shell India Markets P Ltd v ACIT High CourtHelps taxpayerNo later treatment found
  The TPO says we issued shares to our parent too cheaply. Can he tax the shortfall?
  No. The issue of equity to a non-resident parent is on capital account and gives rise to no income, and Chapter X is machinery for computing income at arm's length, not a charge. With no income there is nothing for the transfer pricing machinery to work on, and re-characterising the alleged shortfall as an interest-bearing loan has no statutory foundation.
• Faith Intertrade v ITO ITATHelps taxpayer
  I obtained Form 3CEB from my accountant but never uploaded it, and the officer has levied the flat Rs 1 lakh penalty under s.271BA. Is that penalty automatic?
  It is not automatic. Section 271BA says the officer 'may' direct payment of the penalty, not 'shall', and s.273B forbids the penalty where the assessee proves reasonable cause. The Tribunal quashed a Rs 1,00,000 penalty on an assessee who had obtained the accountant's report dated 7 September 2013 but failed to upload it electronically, in the first year in which specified domestic transactions were brought within s.92E, where the TPO had made no adjustment at all.
• Danfoss Power Solutions Pvt Ltd v CIT(A)-38, New Delhi ITATHelps taxpayerNo later treatment found
  The Commissioner (Appeals) has levied a penalty under s.271J on my company because my accountant's Form 3CEB was said to contain incorrect information. Can the penalty be levied on me at all?
  No. s.271J allows a penalty only against the accountant, merchant banker or registered valuer who furnished the incorrect information, and not against the assessee on whose behalf the report or certificate was furnished. The Tribunal held the penalty could not be levied on the assessee and directed its deletion.
• Statutory position — section 9A(4) and rule 10V: who counts as an eligible fund manager, and the minimum fee the fund must pay him CBDT Circulars & InstructionsCuts both ways
  I am setting up an India-based manager for an offshore fund. What does the manager himself have to satisfy, and is there a floor on the fee the fund must pay him?
  Section 9A(4) defines the eligible fund manager as a person engaged in the activity of fund management who satisfies four conditions: he is not an employee of the fund or a connected person of the fund; he is registered as a fund manager or an investment advisor in accordance with the specified regulations; he is acting in the ordinary course of his business as a fund manager; and he, along with his connected persons, is not entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the fund from the transactions carried out by the fund through him. Separately, condition (m) of section 9A(3) requires the fund's remuneration to him to be not less than a prescribed amount, and rule 10V(12) prescribes that amount.
• 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 — 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.

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.