|CORAM:||R. S. Syal (AM), Suchitra Kamble (JM)|
|CATCH WORDS:||sham transactions, Transfer Pricing|
|DATE:||April 11, 2018 (Date of pronouncement)|
|DATE:||April 27, 2018 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Transfer Pricing: The "international transaction" as defined in s. 92F(v) has to be a genuine transaction. Transfer pricing provisions do not apply to non-genuine or sham transactions|
It is elementary that the ALP is determined of an `international transaction’, which has been defined in section 92B of the Act. The term `transaction’, for the purposes of the Chapter–X containing transfer pricing provisions, has been defined in clause (v) of section 92F to include an arrangement, understanding or action in concert. It shows that the ALP is always determined of an international transaction, which is genuine, but may be formal or in writing and whether or not intended to be enforceable by legal proceeding. If a transaction itself is not genuine, there can be no question of applying the transfer pricing provisions to it. In such an eventuality of a supposed genuine transaction turning out to be non-genuine, all the consequences which would have flowed for a real transaction, are reversed. In other words, certain deductions which would have been otherwise allowed in case of a genuine international transaction, are denied. Nitty-gritty of the matter is that only a declared and accepted genuine international transaction can be subjected to the transfer pricing regulations. If an international transaction is proved to be not genuine, the transfer pricing provisions are not triggered.