Transfer pricing

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2015 A Prop. Ship firm Purchasing Goods From the Foreign Company in which the Brother of Prop. is a director.

Now my Question is whether is comes in Domestic transfer Pricing if the limit exceeds????

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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13 February 2015 yes transfer pricing is applicable in this case........

Querist : Anonymous

Querist : Anonymous (Querist)

14 February 2015 Bt the Purchase is from Foreign company than also it comes in Domestic Transfer Pricing

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Thanks for the detailed context. Let's break this down clearly.

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### 🔍 **Scenario Recap:**

* A **proprietorship firm in India** is **purchasing goods from a foreign company**.
* The **brother of the proprietor is a director in the foreign company**.
* The value of the transaction **exceeds the prescribed threshold**.

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### ❓ **Question:**

> Does this transaction fall under **Domestic Transfer Pricing** even though it's a transaction with a **foreign company**?

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### ✅ **Answer:**

No, this transaction **does not fall under Domestic Transfer Pricing (DTP)**. It falls under **International Transfer Pricing**.

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### 📌 **Reasoning:**

1. **Nature of the Transaction:**

* The purchase is from a **foreign company** — this makes it an **international transaction** under Indian transfer pricing law.

2. **Associated Enterprise (AE):**

* As per **Section 92A** of the Income Tax Act, if the **brother of the proprietor is a director** in the foreign company, and there is **deemed control or influence**, it can result in **AE relationship**.
* You would need to test the relationship under Section 92A(2) — particularly clauses related to participation in management, control, or capital.

3. **Transfer Pricing Applicability:**

* If the **foreign entity qualifies as an AE**, then **Section 92B** applies, and it becomes an **international transaction**.
* Therefore, **international transfer pricing documentation** is required if the value **exceeds ₹1 crore (₹10 million)**.

4. **Domestic Transfer Pricing (DTP):**

* DTP (Section 92BA) applies to **specified domestic transactions** — which are between **Indian entities** or **related parties within India**, especially where **tax base shifting** could occur (e.g., profit-linked deductions).
* Since the seller is a **foreign company**, DTP **does not apply**.

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### ✅ **Conclusion:**

* ✔️ **This is an International Transaction.**
* ❌ **Not a Domestic Transfer Pricing case.**
* 📄 **International transfer pricing documentation** under **Section 92D and Rule 10D** is required, if thresholds and AE conditions are met.

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If you like, I can help you determine whether the foreign company qualifies as an Associated Enterprise under Section 92A.

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