107A. Definitions.-

1[CHAPTER XIA

TRANSFER PRICING

107A. Definitions.-

In this Chapter, unless there is anything repugnant in the subject or context, -

(1) “arm’s length price” means a price in a transaction, the conditions (e.g. price, margin or profit split) which do not differ from the conditions that would have prevailed in a comparable uncontrolled transactions between independent entities carried out under comparable circumstances;

(2) “associated enterprise”, in relation to another enterprise, means an enterprise which, at any time during the income year, has the following relationship with the other enterprise-

(a) one enterprise participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or

(b) the same person or persons participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital, of both enterprises; or

(c) one enterprise holds, directly or indirectly, shares carrying more than twenty five percent of the voting power in the other enterprise; or

(d) the same person or persons controls shares carrying more than twenty five percent of the voting power in both enterprises; or

(e) the cumulative amount of borrowings of one enterprise from the other enterprise constitutes more than fifty percent of the book value of the total assets of that other enterprise; or

(f) the cumulative amount of guarantees provided by one enterprise in favour of the other enterprise constitutes more than ten percent of the book value of the total borrowings of the other enterprise; or

(g) more than half of the board of directors or members of the governing board of one enterprise are appointed by the other enterprise; or

(h) any executive director or executive member of the governing board of one enterprise is appointed by, or is in common with the other enterprise; or

(i) the same person or persons appoint more than half of the board of directors or members in both enterprises; or

(j) the same person or persons appoint any executive director or executive member in both enterprises; or

(k) one enterprise has the practical ability to control the decision of the other enterprise; or

(l) the two enterprises are bonded by such relationship of mutual interest as may be prescribed;

(3) “enterprise” means a person or a venture of any nature (including a permanent establishment of such person or venture);

(4) “independent enterprise” means an enterprise that is not an associated enterprise;

(5) “international transaction” means a transaction between 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 money, or any other transaction having a bearing on the profits, income, losses, assets, financial position or economic value of such enterprises, and includes-

(a) a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises;

(b) a transaction entered into by an enterprise with a person other than an associated enterprise, if there exists a prior agreement in relation to the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise;

(6) “permanent establishment” includes a place of management, a branch, an agency, an office, a warehouse, a factory, a workshop, a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, a firm or plantation, or any other fixed place through which the business of the enterprise is wholly or partly carried on;

(7) “property” includes goods, articles, things or items, patent, invention, formula, process, design, pattern, know-how, copyright, trademark, trade name, brand name, literary, musical, or artistic composition, franchise, license or contract, method, program, software, database, system, procedure, campaign, survey, study, forecast, estimate, customer list, technical data, any aspects of advertising and marketing, any item which has substantial value, or any other intangible property;

(8) “record” includes electronically held information, documents and records;

(9) “Transfer Pricing Officer” means any income tax authority authorised by the Board to perform the function of a Transfer Pricing Officer;

(10) “transaction” includes an arrangement, understanding or action between two or more parties, whether or not such arrangement, understanding or action is formal or in writing; or whether or not it is intended to be enforceable by legal proceeding;

(11) “uncontrolled transaction” means a transaction undertaken between enterprises not being the associated enterprises.

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1 Ins. new chapter "Chapter XIA" by F. A. 2012

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