Important points on International Taxation

Sl. Sec Heading Relevant Points

No.
1 90 Double Taxation i. relief measures for assesses involved in paying taxes twice i.e. paying taxes
Relief (DTR) in India as well as in Foreign Countries or a territory outside Indi
ii. Section 90 also contains provisions which will certainly enable the Central
Government to enter into an agreement with the Government of any country
outside India or a definite territory outside India
2 90A Adoption by the Any specified association in India may enter into an agreement with any
Central Govt. of specified association in the specified territory outside India and the Central
agreement between Govt. may by notification in official gazette make necessary provision for this.
specified association
for DTR
3 91 Countries with Grant of Relief from double taxation where no double taxation avoidance
which no agreement agreement exists.
exists ii. The assessee is a resident in India during the relevant previous year. The
income accrues or arises to him outside India during that previous year. Such
income is not deemed to accrue or arise in India during the previous year.
Lower of the following sums shall be deductible from Indian income tax
(a) Doubly taxed income x Indian rate of tax or
(b) Doubly taxed income x Rate of tax paid in other country
Above is also applicable to any NON-RESIDENT person for his income of
registered firm assessed as RESIDENT.
Iii. In respect of Pakistan, lower of the following will be deductible
(a) Amount of tax paid in Pakistan or
(b) Sum calculated on that income at Indian rate of tax.
4 92 Computation of Any income arising from an international transaction shall be computed having
income from regard to the arm’s length price.
international ii. Where in an international transaction or specified domestic transactions, two
transaction having or more associated enterprises enter into a mutual agreement or arrangement
regard to arm's for the allocation or apportionment of cost, the same shall be determined
length price having regard to arm’s length price.
5 92A Associated Associated enterprise means an enterprise which participates directly or
enterprise indirectly or through one or more intermediaries in the management or control
or capital of the other enterprises.
Share- carrying not less than 26% of voting right, loan-not less than 51%,
borrowing guarantee-not less than 10%, appointment of director/governing
body/executive board-more than half, supply of raw material-90% or more
ii. Where an enterprise is a firm, AOP or BOI, the other enterprise holds not
less than 10% interest in such firm, AOP or BOI.
iii. Where one enterprise is controlled by an HUF, the other enterprise is
controlled by a member of such HUF or by relative of a member of such HUF
or jointly.

6 92B International Means a transaction which is a transaction between two or more associated
Transaction enterprises, either or both of whom are non-residents.
7 Deemed A transaction entered into by an enterprise with a person other than an
International associated enterprise but
Transaction (a) there exists a prior agreement in relation to the relevant transaction between
such other person and the associated enterprise, or
(b) Where the enterprise or the associated enterprise or both of them are non-
residents irrespective of whether such other person is a non-resident or not.
8 92B Specified Domestic Where the aggregate of the following exceeds ₹ 20 crore in PY
A Transaction i. inter-unit transfer of goods and services by an undertaking or unit or
enterprise or eligible business to other business carried on by the assessee or
vice versa, for consideration not corresponding to the market value on the date
 of transfer (Sec 80A)
ii. inter-unit transfer of goods or services between eligible business and other
business, where the consideration for transfer does not correspond with the
market value of goods and services (Sec 80IA)
iii. any business transacted between the assessee and other person as referred
to in section 80-IA i.e. closely connected
iv. any other transactions so prescribed
9 Arm’s Length The arm's length price in relation to international transaction or specified
Pricing Method domestic transaction shall be determined by any of the following methods,
namely -
(i) Comparable uncontrolled price method [CUPM]
(ii) Resale price method [RPM]
(iii) Cost plus method [CPM]
(iv) Profit split method [PSM]
(v) Transactional net margin method [TNMM]
(vi) Such other method as may be prescribed by the Board.
10 More than one Where more than one price is determined by the most appropriate method, the
92C Arm’s Length Price arm’s length price shall be the arithmetic mean of such prices.
& ii. The CBDT has notified that where variation between ALP determined u/s
Variation/Tolerance 92C does not exceed 1% of the wholesale price (3% otherwise) of international
or specified domestic transactions, then actual transaction price shall be taken
as ALP for AY 2015-16, 2016-17, 2017-18 and 2018-19
11 Wholesale Trading Means an international transaction or specified domestic transaction of trading
in goods, which fulfils the following conditions
i. purchase cost of finished goods is 80% or more of the total cost pertaining to
such trading activities
ii. average monthly closing inventory of such goods is ten percent or less of
sales pertaining to such trading activities
12 92C Non-compliance of Where AO is satisfied that appropriate method has not been applied to
(3) & most appropriate determine the international transaction/specified domestic transaction or
(4) method information/document not maintained by the assessee under 92D, he may
i. Computation of total income by AO.
ii. No deduction on excess income under section 10AA or under Chapter VI-A.
iii. No re-computation of income of other associated enterprise.
13 92C Reference to i. Transfer Pricing Officer means A JC/DC/AC authorised by the CBDT to act
A Transfer Pricing as transfer pricing officer.
Officer ii. Reference to Transfer Pricing Officer shall be made by AO with the
previous approval of the Principal Commissioner or CIT for computation of
ALP.
iii. TPO is empowered to determine ALP of international transactions even if
not referred by AO.
iv. TPO is empowered to determine ALP of international transactions not
reported u/s 92E
v. TPO to pass order at least 60 days before the time-limit for completion of
assessment.
vi. Where a reference is made to Transfer Pricing Officer (TPO) u/s 92CA, the
period available for assessment or re-assessment shall be extended by 12
months (Sec 153B)

14 92C Safe harbour rules. Safe harbour" means circumstances in which the income-tax authorities shall
B accept the transfer price declared by the assessee.
ii. The determination of arm's length price under section 92C or section 92CA
shall be subject to safe harbour rules.
iii. the Board is empowered to make such rules
15 Advance Pricing i. an agreement between a taxpayer and a taxing authority on an appropriate
Agreement (APA) transfer pricing methodology for a set of transactions over a fixed period of
 time in future.
ii. Board with the approval of the Central Govt. is empowered to enter into an
APA with any person for determination of ALP.
iii. Shall be valid for such period not exceeding 5 consecutive PYs as specified
92C in the agreement.
C iv. Binding upon both the tax-payer and IT department.
16 Roll Back of APA Refers to applicability of the methodology of determination of ALP or the
ALP to be applied to the international transaction which has already been
entered into a period prior to the period covered under an APA not exceeding 4
previous years preceding the first of the previous years under APA
17 92C Effect of APA i. Submission of modified return within a period of 3 months from the end of
D the month in which the said APA was entered into, if a return is already
furnished under Sec 139
ii. If income already assesses before expiry of the period for submission of
modified return, reassessment shall be made in light of modified return
iii. Time-limit for completion of assessments/reassessment: within a period of
1 year from the end of the financial year in which the modified return is
furnished.
iv. Pending assessment are to be completed in accordance with modified
return: Time limit to be extended by 12 months forcompletion of assessment.
18 92C Secondary i. Secondary adjustment in certain cases wherever applicable shall be made
E Adjustment provided the amount of primary adjustment made in previous year shall exceed
one ₹ 1 crore
ii. The primary adjustment is made in respect of an AY commencing on or
after 01.04.2016.
19 Primary means the determination of transfer price in accordance with the arm’s length
Adjustment to a principle resulting in an increase in the total income or reduction in the loss, as
transfer price the case may be, of the assessee
20 Secondary means an adjustment in the books of account of the assessee and its associated
Adjustment enterprise to reflect that the actual allocation of profits between the assessee
and its associated enterprise are consistent with the transfer price determined
as a result of primary adjustment, thereby removing the imbalance between
cash account and actual profit of the assessee
21 Excess Money means the difference between the arm’s length price determined in primary
adjustment and the price at which the international transaction has actually
been undertaken
22 92D Maintenance and AO/Commissioner (Appeal) direct person concerned to furnish document in 30
keeping of days of the notice. An extension of 30 days may also be granted.
information and ii. Penalty of ₹ 5 lakh u/s 271AA for non-furnishing of information
document by person /documents (2% of transaction value u/s 271G TPO) maintenance of record.
entering into an iii. Penalty for failure to non-maintenance of information or document under
international Section 92D (Sec. 271AA)- 2% of the value of the transaction for each such
transactions or failure
specified domestic
transactions
23 92E Report from an persons entering into international transaction or specified domestic
Accountant transaction on or before the due date for furnishing return of income under
section 139(1)
ii. 30th November every year in such case.
iii. Penalty for failure to furnish report from CA - ₹ 1 Lakh (271BA)
24 92F Definitions Arms’ length Price means a price which is applied or proposed to be applied
in a transaction between person other than associated enterprises in
uncontrolled condition
Permanent establishment includes a fixed place of business through which
the business of the enterprise is wholly or partially carried on.