Section 92F

Section 92F — the law in short

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

• 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.
• Bausch & Lomb Eyecare (India) Pvt Ltd v ACIT High CourtHelps taxpayerValidity unconfirmed
  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.
• Statutory position — s.115BAE: the 15 per cent regime for new manufacturing co-operative societies, and the absence of case law CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  A new manufacturing co-operative society wants the 15 per cent rate. What does s.115BAE require, and is there any decided case on it?
  Section 115BAE, inserted by the Finance Act 2023 with effect from 1 April 2024, taxes a resident co-operative society at 15 per cent from AY 2024-25 if it was set up and registered on or after 1 April 2023 and commenced manufacturing or production of an article or thing on or before 31 March 2024, and if the other conditions in sub-section (2) are met. I located no judicial decision on the section — no High Court, Tribunal or Supreme Court authority on s.115BAE was found, and this entry states the statute, not case law.
• Statutory position — s.115BAB(2) conditions, the Form 10-ID option and the s.115BAB(6) more-than-ordinary-profit adjustment CBDT Circulars & InstructionsCuts both ways
  My client wants the 15 per cent rate for a new manufacturing company. What exactly must it satisfy, and what is the exposure once it is in?
  Section 115BAB requires that the company was set up and registered on or after 1 October 2019 and commenced manufacturing or production of an article or thing on or before 31 March 2024, that it is not formed by splitting up or reconstruction, that it uses no previously used machinery or plant and no building previously used as a hotel or convention centre in respect of which s.80-ID was claimed, that it carries on no business other than manufacture or production and research in relation to, or distribution of, what it makes, and that its total income is computed without the excluded deductions. The option is exercised under s.115BAB(7) in Form 10-ID on or before the s.139(1) due date for the first return, and once exercised it cannot be withdrawn for that or any other previous year.

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.