A Treatise on Indian Transfer Pricing Regulations - Part II: A Treatise on Indian Transfer Pricing Regulations, #2

By Prabhakar Reddy Dokuru

This is Part-II of the Series on "A Treatise on Indian Transfer Pricing Regulations" and a sincere effort made by an ex-IRS Officer from India to bring a Treatise on Indian Transfer Pricing Regulations to have deeper understanding of transfer pricing framework in India and the judicial interpretation of the same. This series will be useful for all corporates, consultants, attorneys, lawyers, and advocates dealing with transfer pricing issues in India or abroad.

• Language: English
• Publisher: Prabhakar Reddy Dokuru
• Release date: Apr 12, 2022
• ISBN: 9798201358082

Book preview

FOREWORD

This is Part-II of the Series on A Treatise on Indian Transfer Pricing Regulations and a sincere effort made by an ex-IRS Officer from India to bring a Treatise on Indian Transfer Pricing Regulations to have deeper understanding of transfer pricing framework in India and the judicial interpretation of the same. This series will be useful for all corporates, consultants, attorneys, lawyers, and advocates dealing with transfer pricing issues in India or abroad.

Part-II of the Series deals with the definition of Associated Enterprise under Section 92A of the Income-tax Act, 1961, interpretation and implications thereof.

I would like to thank my mentors and my family in encouraging me to do this exercise.

ABOUT THE AUTHOR

D. Prabhakar Reddy, an alumnus of IIT, Kharagpur, has more than 23 years of experience in the Direct Taxes in the Income Tax Department in India, wherein, he had the opportunity to work at multiple levels and different areas. He garnered wide experience in assessment of corporates and also in investigation wing of the Department for more than 5 1/2 years, dealing with varied and complex corporate tax issues.

He had 6 ½ years of his service dedicated to the field of Transfer Pricing, wherein, he accredited himself in a variety of roles and dealt with more than 1000 Transfer Pricing audits. He was deputed as one of the Indian representatives to UN to participate in deliberations relating to finalisation of the United Nations’ Practical Manual on Transfer Pricing for Developing Countries in 2011. He was invited as Guest Faculty by OECD as Trainer in advanced level Transfer Pricing course conducted in NADT.

He was part of various committees of the Department, including for suggesting amendments to the Income-tax Act, 1961, relating to Transfer Pricing issues. He was part of the Committee formed in 2012 to Review Taxation of Development Centres and the IT Sector under the Chairmanship of Mr. N Rangachary, former Chairman CBDT & IRDA. As part of the Committee, he was instrumental in finalization of the proposals relating to taxation of software R&D centres in India and Safe Harbour Provisions forming part of these reports of the Committee. 

He also assisted Indian Competent Authority (CA) as Transfer Pricing Specialist in successful conclusion of negotiations and finalisation of framework under MAP with the CA of USA, mainly in Software and ITES cases.

Presently he is working as a Partner in Sridha Tax & Legal Services LLP, Hyderabad, India and rendering tax advisory services and acting as a direct tax advocate to represent clients before Hon’ble tax Tribunals.

92A. Meaning of associated enterprise.—

(1) For the purposes of this section and sections 92, 92B, 92C, 92D, 92E and 92F, associated enterprise, in relation to another enterprise, means an enterprise—

(a) which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or

(b) in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in its management or control or capital, are the same persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise.

[1][(2) For the purposes of sub-section (1), two enterprises shall be deemed to be associated enterprises if, at any time during the previous year,—]

(a) one enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent. of the voting power in the other enterprise; or

(b) any person or enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent. of the voting power in each of such enterprises; or

(c) a loan advanced by one enterprise to the other enterprise constitutes not less