u/s 27OA(4) & (5)
This query is : Resolved
ROHIT YADAV
(Querist)
13 September 2017
please explain meaning of intangible addition in case of sec. 27OA (4)&(5).
ROHIT YADAV
(Querist)
14 September 2017
please revert ????
02 August 2025
Sure! Here's a clear explanation of **Section 27OA(4) & (5)** and the concept of **intangible addition**:
---
### Context:
Section 27OA comes under the **Income Tax Act** related to **transfer pricing** provisions and adjustments by the Assessing Officer (AO) for international transactions or specified domestic transactions.
---
### What is **Intangible Addition** under Sec 27OA(4) & (5)?
* When the AO **makes an addition to the income** of the taxpayer, such addition could be related to **intangible assets** or values.
* **Intangible additions** refer to **adjustments relating to intangible properties**, like goodwill, patents, copyrights, trademarks, know-how, or other non-physical assets.
---
### Section 27OA(4) & (5) Overview:
* **Sub-section (4)** deals with **making adjustments** to the income of the taxpayer for international or specified domestic transactions to reflect the arm’s length price (fair market value).
* It includes **intangible additions** where the AO may increase the income due to undervaluation or non-disclosure of intangible assets or transactions involving them.
* **Sub-section (5)** relates to **reduction or reversal of such intangible additions**, if the taxpayer furnishes evidence or facts supporting the valuation or existence of such intangible assets or transactions.
---
### Meaning of Intangible Addition:
* It means the AO has identified **some intangible value or asset** that has not been reported or has been undervalued in the taxpayer’s books.
* To **align the income with arm’s length price**, the AO adds the value of such intangible asset or income arising from it to the taxpayer’s income.
* This adjustment ensures **tax is charged fairly on intangible economic value** that might otherwise be shifted or hidden.
---
### Simple example:
If a company has undervalued a trademark or royalty income from a patent in its international transaction, the AO can make an **intangible addition** to taxable income reflecting the true value.
---
If you want, I can help you with the exact text of Sec 27OA(4) & (5) or examples for better clarity. Would you like that?
---
### Context:
Section 27OA comes under the **Income Tax Act** related to **transfer pricing** provisions and adjustments by the Assessing Officer (AO) for international transactions or specified domestic transactions.
---
### What is **Intangible Addition** under Sec 27OA(4) & (5)?
* When the AO **makes an addition to the income** of the taxpayer, such addition could be related to **intangible assets** or values.
* **Intangible additions** refer to **adjustments relating to intangible properties**, like goodwill, patents, copyrights, trademarks, know-how, or other non-physical assets.
---
### Section 27OA(4) & (5) Overview:
* **Sub-section (4)** deals with **making adjustments** to the income of the taxpayer for international or specified domestic transactions to reflect the arm’s length price (fair market value).
* It includes **intangible additions** where the AO may increase the income due to undervaluation or non-disclosure of intangible assets or transactions involving them.
* **Sub-section (5)** relates to **reduction or reversal of such intangible additions**, if the taxpayer furnishes evidence or facts supporting the valuation or existence of such intangible assets or transactions.
---
### Meaning of Intangible Addition:
* It means the AO has identified **some intangible value or asset** that has not been reported or has been undervalued in the taxpayer’s books.
* To **align the income with arm’s length price**, the AO adds the value of such intangible asset or income arising from it to the taxpayer’s income.
* This adjustment ensures **tax is charged fairly on intangible economic value** that might otherwise be shifted or hidden.
---
### Simple example:
If a company has undervalued a trademark or royalty income from a patent in its international transaction, the AO can make an **intangible addition** to taxable income reflecting the true value.
---
If you want, I can help you with the exact text of Sec 27OA(4) & (5) or examples for better clarity. Would you like that?
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