Amendment of section 92B
31. In section 92B of the Income-tax Act, in sub-section (2), with effect from the 1st day of April, 2015,–
(i) for the words “deemed to be a transaction”, the words “deemed to be an international transaction” shall be substituted;
(ii) after the words “determined in substance between such other person and the associated enterprise”, the words “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” shall be inserted.
Notes on Clauses:
Clause 31 of the Bill seeks to amend section 92B of the Income-tax Act relating to meaning of international transaction.
The existing provisions of section 92B provide for the meaning of “international transaction” for the purposes of applicability of transfer pricing regime. Sub-section (1) defines International transaction as a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property or provision of services or lending or borrowing of money or any transaction having a bearing on profits, income, losses or assets of such enterprises.
Sub-section (2) of the said section provides for deeming of a transaction between an enterprise and unrelated third party as a transaction between two associated enterprises subject to the condition that there exists a prior agreement in relation to the relevant transaction between the third party and associated enterprise or the terms of the relevant transaction are determined in substance between such third party and the associated enterprise.
It is proposed to amend the said sub-section (2) so as to provide that the relevant transaction shall be deemed to be an international transaction, 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.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.
