Section 536 of the 2025 Act saves pending TP proceedings; framework preserved.
HISTORICAL CONTEXT
Section 10AA — inserted by Finance Act, 2005 alongside the SEZ Act, 2005 — provides tax holidays for Special Economic Zone units. It is the most current incarnation of India's export-led-growth tax-incentive framework. Operative since AY 2006-07, section 10AA has supported SEZ unit investments across India's IT, pharmaceuticals, manufacturing, and services sectors.
Operative architecture — section 10AA(1) — graded 15-year deduction: (a) first 5 AYs — 100% of profits and gains derived from export; (b) next 5 AYs (6-10) — 50% of such profits; (c) further 5 AYs (11-15) — 50% of such profits, subject to creation of SEZ Reinvestment Reserve. Total potential holiday = 15 AYs.
Finance Act, 2016 brought the sunset — section 10AA ceased to apply for new SEZ units that commence manufacture or service supply AFTER 1-April-2020. Existing units continue for their balance of 15-year window. The framework has supported substantial SEZ investments; many global IT / ITeS / pharma majors built India operations leveraging section 10AA. Income-tax Act 2025 preserves the framework for legacy claims.
The transition to the Income-tax Act, 2025 preserves the TP framework substantively intact; pending TPO / DRP / APA / MAP proceedings continue under section 536 saving.
▸ Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667 ; (2000) 1 SCR 1 (Supreme Court)
Facts. A municipal levy was challenged on the ground that the charging provision did not clearly specify the rate, the persons charged, and the measure of tax.
Issue. Whether a tax can be imposed in the absence of a clear, unambiguous charging provision identifying the subject, measure, rate, and incidence.
HELD. Article 265 demands that tax be levied only by clear authority of law. The four components — taxable event, person, rate, and measure — must be clearly discernible from the charging provision; ambiguity is fatal to the levy.
“The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions, particularly when the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose other than what is given expression to.”
Relevance. Foundational authority on the rigour required of charging sections — underpins arguments that ambiguous deeming fictions, surcharge formulas, and rate prescriptions must be strictly construed.
Facts. The Department sought to apply a surcharge provision retrospectively to block-period assessments. The assessee contended that the amendment was substantive and could not have retrospective operation absent express legislative direction.
Issue. Whether amendments to taxing statutes operate prospectively unless the legislature has expressly or by necessary implication conferred retrospective effect.
HELD. The Constitution Bench reaffirmed the general rule against retrospectivity of taxing statutes. A taxing provision must be construed prospectively unless the language compels otherwise; mere insertion or substitution by amendment is not sufficient to deny vested rights.
“Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.”
Relevance. Anchor authority for any argument that an amendment to a charging or computational provision must apply only from the AY notified — useful in transitional disputes around FA 2025 and the 1961 → 2025 changeover.
Facts. Section 52(2) (since deleted) deemed sale consideration to be FMV where FMV exceeded the declared consideration by 15%. The Department applied it on a literal reading even when the assessee had not in fact received more than the declared price.
Issue. Whether a deeming provision in a charging schema can be construed literally where its plain reading produces a result manifestly contrary to legislative object.
HELD. The Court read down section 52(2) to apply only where the assessee had actually received consideration in excess of the declared sum. A literal construction yielding absurd or unjust results must yield to an object-based interpretation; the CBDT's contemporaneous Circular No. 96 was held binding on the Revenue.
“It is well settled that a literal construction of a statutory provision ought not to be adopted if it produces a manifestly unjust result… Where a literal construction creates an anomaly, the courts will adopt that construction which avoids the anomaly.”
Relevance. Anchor authority for purposive construction of deeming fictions across the 1961 Act — applies wherever a deeming clause (e.g., s. 50C, s. 56(2)(x), s. 2(22)(e)) yields a result contrary to legislative purpose.
▸ Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income-tax (2021) 432 ITR 471 ; (2022) 3 SCC 321 (Supreme Court — 3-Judge Bench)
Facts. Indian end-users imported shrink-wrap / off-the-shelf software. The Department characterised the payments as 'royalty' attracting section 195 withholding; the assessees contended that what was sold was a copyrighted article, not the copyright itself, hence no royalty.
Issue. Whether payments for off-the-shelf software amount to royalty under DTAA (Article 12) and trigger section 195 withholding.
HELD. The amounts paid by resident Indian end-users / distributors to non-resident software manufacturers / suppliers for the use of computer software are not payments of royalty for the use of copyright. No section 195 obligation arises; section 9(1)(vi) read with DTAA Article 12 governs.
“Once a DTAA applies, the provisions of the Act can only apply to the extent that they are more beneficial to the assessee… The amounts paid by resident end-users are not the consideration for the use of or the right to use copyright.”
Relevance. Definitive authority on cross-border software royalty — eliminates section 195 obligation on most B2B software import payments; broad implications for licensing, SaaS, cloud-services characterisation.
▸ Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta (1961) 41 ITR 191 ; AIR 1961 SC 372 (Supreme Court — Constitution Bench)
Facts. The assessee challenged a section 34 reassessment notice on the ground that the ITO had no jurisdictional foundation to reopen; the Revenue contended that the writ jurisdiction was ousted by the statutory appeals scheme.
Issue. Whether the High Court's jurisdiction under Article 226 is ousted by the existence of a statutory remedy where the reassessment notice itself lacks jurisdictional foundation.
HELD. Existence of an alternative statutory remedy does not oust Article 226 jurisdiction where the impugned action is wholly without jurisdiction. The burden is on the assessee to disclose all primary facts; the duty to draw inferences rests with the assessing officer.
“The duty of the assessee in every case is to disclose fully and truly all primary facts. Once all primary facts are before the assessing authority, he requires no further assistance by way of disclosure.”
Relevance. Foundational on the boundary between assessee's disclosure duty and the ITO's investigative duty — supports challenges to s. 147/148 (1961) / s. 281 (2025) reassessments on jurisdictional grounds.
CBDT CIRCULARS — ECOSYSTEM
▸ CBDT Circular No. 14(XL-35) of 1955 dated 11 April 1955
Subject. Duty of officers to assist assessees in claiming and securing relief
Substance. Foundational circular directing that the AO should not exploit assessee ignorance to deny legitimate reliefs; officer is required to draw attention to refunds or reliefs to which the assessee is entitled. The circular has been judicially noted in several appellate decisions and remains operative for first-appellate practice.
Substance. Explained the FA 1987 / FA 1989 amendments unifying the previous year with the financial year preceding the AY, including transitional provisions for assessees with different accounting years. Useful in any controversy on the timing of accrual / chargeability for early post-1989 AYs.
▸ CBDT Circular No. 5 of 2014 dated 11 February 2014
Subject. Section 14A — dis-allowance even where no exempt income earned (since modulated)
Substance. Initially directed AOs to apply Rule 8D disallowance under section 14A even where no exempt income was earned in the year; subsequently modulated by Cheminvest (Del HC) and Maxopp (SC). FA 2022 amendment to section 14A re-asserted the position but remains under litigation.
▸ CBDT Circular No. 6 of 2019 dated 20 March 2019
Subject. Withdrawal of low-tax-effect appeals — monetary thresholds
Substance. Revised monetary thresholds for departmental appeals — ITAT (Rs 50L), HC (Rs 1 Cr), SC (Rs 2 Cr); subsequently further revised. Operates as a non-statutory limitation on the Revenue's appellate engagement, binding under section 119.
Substance. Procedural guidance for AOs handling transitional reassessment notices for AYs 2013-14 to 2017-18 affected by Ashish Agarwal and Rajeev Bansal. Sets out the form of section 148A inquiry, time-bar calculation under TOLA, and JAO/FAO jurisdiction in faceless cases.
WORKED EXAMPLES
Illustration — Illustration 1 — Full 15-year holiday
Facts. F Ltd commenced SEZ unit 1-April-2018; export income Rs 100 cr in Year 1.
STATUTORY ARCHITECTURE — 18-ROW MAP
01. Section & marginal note
Section 10AA — Special Economic Zone (SEZ) Units — Chapter X-B (Transfer Pricing).
02. Sub-section structure
Per operative text — see Block 1 verbatim.
03. Operative trigger
International transaction (or SDT) between Associated Enterprises.
04. Persons affected
Resident or NR — wherever ALP / AE / international-transaction nexus exists.
05. Time anchor
Per financial year — TP documentation contemporaneous; Form 3CEB due with assessment.
06. Income anchor
Income from international transaction or SDT — to be computed at ALP.
07. Residential-status nexus
AE definition independent of residence; non-resident AE common.
08. Rate / charge mechanism
Recomputed income at ALP taxed at normal rates; primary + secondary adjustments separately.
09. TDS / TCS interaction
TDS u/s 195 on payments to NR-AE; rate consistent with treaty / domestic source rule.
10. Advance-tax obligation
Recomputed income subject to advance tax; interest u/s 234A/B/C.
11. Presumptive provisions
TP framework applies notwithstanding presumptive regime.
12. Exemption / deduction mechanism
Deductions disallowed if not at ALP; secondary adjustment may be repatriation-deemed.
13. Refund / credit
Net effect post-MAP / APA; foreign tax credit interplay.
14. Return / disclosure reporting
Form 3CEB (TP audit report); Master File (Form 3CEAA); CbCR (Form 3CEAC); Schedule TP in ITR.
15. Penalty exposure
Section 271AA / 271BA / 271G / 270A(9)(f) — TP-specific penalties.
16. Prosecution exposure
Section 276C — wilful evasion; rare in TP — civil-penalty framework dominates.
17. Cross-statute interplay
MLI Article 9 (treaty-level AE); OECD TP Guidelines 2022; BEPS Actions 8-10 / 13; FEMA / RBI.
18. Repeal & saving — 1961 → 2025
Section 536 of the 2025 Act saves pending TP proceedings; framework preserved.
HISTORICAL CONTEXT
Section 10AA — inserted by Finance Act, 2005 alongside the SEZ Act, 2005 — provides tax holidays for Special Economic Zone units. It is the most current incarnation of India's export-led-growth tax-incentive framework. Operative since AY 2006-07, section 10AA has supported SEZ unit investments across India's IT, pharmaceuticals, manufacturing, and services sectors.
Operative architecture — section 10AA(1) — graded 15-year deduction: (a) first 5 AYs — 100% of profits and gains derived from export; (b) next 5 AYs (6-10) — 50% of such profits; (c) further 5 AYs (11-15) — 50% of such profits, subject to creation of SEZ Reinvestment Reserve. Total potential holiday = 15 AYs.
Finance Act, 2016 brought the sunset — section 10AA ceased to apply for new SEZ units that commence manufacture or service supply AFTER 1-April-2020. Existing units continue for their balance of 15-year window. The framework has supported substantial SEZ investments; many global IT / ITeS / pharma majors built India operations leveraging section 10AA. Income-tax Act 2025 preserves the framework for legacy claims.
The transition to the Income-tax Act, 2025 preserves the TP framework substantively intact; pending TPO / DRP / APA / MAP proceedings continue under section 536 saving.
FINANCE ACT AMENDMENT TIMELINE
■ Finance Act 1981 — Section 10A inserted (FTZ undertakings).
■ Finance Act 1985 — Section 10B inserted (100% EOU deduction).
■ Finance Act 1989 — Section 13A inserted (political party exemption).
■ Finance Act 1996 — Section 10C inserted (NE region; sunset 2007-08).
■ Finance Act 2003 — Section 10BA inserted (handmade carpets).
■ Finance Act 2005 — Section 10AA inserted (SEZ); SEZ Act 2005 enacted.
■ Finance Act 2009 — Section 13B inserted (electoral trust).
■ Finance Act 2009 — Sections 10A / 10B sunset effective AY 2010-11.
■ Finance Act 2010 — Section 12AA refinements; registration framework.
■ Finance Act 2020 — Section 12AB inserted; 12AA legacy framework continued.
■ Finance Act 2022 — Section 12AC inserted (specified violations).
■ Finance Act 2023 — Trust framework refinements (registration validity).
■ Finance Act 2025 — Framework preserved; Income-tax Act 2025 s. 536 saving.
JUDICIAL EVOLUTION — VERIFIED LANDMARK AUTHORITIES
▸ Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667 ; (2000) 1 SCR 1 (Supreme Court)
Facts. A municipal levy was challenged on the ground that the charging provision did not clearly specify the rate, the persons charged, and the measure of tax.
Issue. Whether a tax can be imposed in the absence of a clear, unambiguous charging provision identifying the subject, measure, rate, and incidence.
HELD. Article 265 demands that tax be levied only by clear authority of law. The four components — taxable event, person, rate, and measure — must be clearly discernible from the charging provision; ambiguity is fatal to the levy.
“The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions, particularly when the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose other than what is given expression to.”
Relevance. Foundational authority on the rigour required of charging sections — underpins arguments that ambiguous deeming fictions, surcharge formulas, and rate prescriptions must be strictly construed.
▸ Commissioner of Income-tax v. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 ; (2015) 1 SCC 1 (Supreme Court — 5-Judge Constitution Bench)
Facts. The Department sought to apply a surcharge provision retrospectively to block-period assessments. The assessee contended that the amendment was substantive and could not have retrospective operation absent express legislative direction.
Issue. Whether amendments to taxing statutes operate prospectively unless the legislature has expressly or by necessary implication conferred retrospective effect.
HELD. The Constitution Bench reaffirmed the general rule against retrospectivity of taxing statutes. A taxing provision must be construed prospectively unless the language compels otherwise; mere insertion or substitution by amendment is not sufficient to deny vested rights.
“Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.”
Relevance. Anchor authority for any argument that an amendment to a charging or computational provision must apply only from the AY notified — useful in transitional disputes around FA 2025 and the 1961 → 2025 changeover.
▸ K.P. Varghese v. Income-tax Officer, Ernakulam (1981) 131 ITR 597 ; (1981) 4 SCC 173 (Supreme Court — 3-Judge Bench)
Facts. Section 52(2) (since deleted) deemed sale consideration to be FMV where FMV exceeded the declared consideration by 15%. The Department applied it on a literal reading even when the assessee had not in fact received more than the declared price.
Issue. Whether a deeming provision in a charging schema can be construed literally where its plain reading produces a result manifestly contrary to legislative object.
HELD. The Court read down section 52(2) to apply only where the assessee had actually received consideration in excess of the declared sum. A literal construction yielding absurd or unjust results must yield to an object-based interpretation; the CBDT's contemporaneous Circular No. 96 was held binding on the Revenue.
“It is well settled that a literal construction of a statutory provision ought not to be adopted if it produces a manifestly unjust result… Where a literal construction creates an anomaly, the courts will adopt that construction which avoids the anomaly.”
Relevance. Anchor authority for purposive construction of deeming fictions across the 1961 Act — applies wherever a deeming clause (e.g., s. 50C, s. 56(2)(x), s. 2(22)(e)) yields a result contrary to legislative purpose.
▸ Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income-tax (2021) 432 ITR 471 ; (2022) 3 SCC 321 (Supreme Court — 3-Judge Bench)
Facts. Indian end-users imported shrink-wrap / off-the-shelf software. The Department characterised the payments as 'royalty' attracting section 195 withholding; the assessees contended that what was sold was a copyrighted article, not the copyright itself, hence no royalty.
Issue. Whether payments for off-the-shelf software amount to royalty under DTAA (Article 12) and trigger section 195 withholding.
HELD. The amounts paid by resident Indian end-users / distributors to non-resident software manufacturers / suppliers for the use of computer software are not payments of royalty for the use of copyright. No section 195 obligation arises; section 9(1)(vi) read with DTAA Article 12 governs.
“Once a DTAA applies, the provisions of the Act can only apply to the extent that they are more beneficial to the assessee… The amounts paid by resident end-users are not the consideration for the use of or the right to use copyright.”
Relevance. Definitive authority on cross-border software royalty — eliminates section 195 obligation on most B2B software import payments; broad implications for licensing, SaaS, cloud-services characterisation.
▸ Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta (1961) 41 ITR 191 ; AIR 1961 SC 372 (Supreme Court — Constitution Bench)
Facts. The assessee challenged a section 34 reassessment notice on the ground that the ITO had no jurisdictional foundation to reopen; the Revenue contended that the writ jurisdiction was ousted by the statutory appeals scheme.
Issue. Whether the High Court's jurisdiction under Article 226 is ousted by the existence of a statutory remedy where the reassessment notice itself lacks jurisdictional foundation.
HELD. Existence of an alternative statutory remedy does not oust Article 226 jurisdiction where the impugned action is wholly without jurisdiction. The burden is on the assessee to disclose all primary facts; the duty to draw inferences rests with the assessing officer.
“The duty of the assessee in every case is to disclose fully and truly all primary facts. Once all primary facts are before the assessing authority, he requires no further assistance by way of disclosure.”
Relevance. Foundational on the boundary between assessee's disclosure duty and the ITO's investigative duty — supports challenges to s. 147/148 (1961) / s. 281 (2025) reassessments on jurisdictional grounds.
CBDT CIRCULARS — ECOSYSTEM
▸ CBDT Circular No. 14(XL-35) of 1955 dated 11 April 1955
Subject. Duty of officers to assist assessees in claiming and securing relief
Substance. Foundational circular directing that the AO should not exploit assessee ignorance to deny legitimate reliefs; officer is required to draw attention to refunds or reliefs to which the assessee is entitled. The circular has been judicially noted in several appellate decisions and remains operative for first-appellate practice.
▸ CBDT Circular No. 549 dated 31 October 1989
Subject. Explanatory notes — Finance Act 1989 amendments (incl. PY unification)
Substance. Explained the FA 1987 / FA 1989 amendments unifying the previous year with the financial year preceding the AY, including transitional provisions for assessees with different accounting years. Useful in any controversy on the timing of accrual / chargeability for early post-1989 AYs.
▸ CBDT Circular No. 5 of 2014 dated 11 February 2014
Subject. Section 14A — dis-allowance even where no exempt income earned (since modulated)
Substance. Initially directed AOs to apply Rule 8D disallowance under section 14A even where no exempt income was earned in the year; subsequently modulated by Cheminvest (Del HC) and Maxopp (SC). FA 2022 amendment to section 14A re-asserted the position but remains under litigation.
▸ CBDT Circular No. 6 of 2019 dated 20 March 2019
Subject. Withdrawal of low-tax-effect appeals — monetary thresholds
Substance. Revised monetary thresholds for departmental appeals — ITAT (Rs 50L), HC (Rs 1 Cr), SC (Rs 2 Cr); subsequently further revised. Operates as a non-statutory limitation on the Revenue's appellate engagement, binding under section 119.
▸ CBDT Circular No. 5 of 2024 dated 15 March 2024
Subject. Procedure for transitional reassessment notices post-Ashish Agarwal / Rajeev Bansal
Substance. Procedural guidance for AOs handling transitional reassessment notices for AYs 2013-14 to 2017-18 affected by Ashish Agarwal and Rajeev Bansal. Sets out the form of section 148A inquiry, time-bar calculation under TOLA, and JAO/FAO jurisdiction in faceless cases.
WORKED EXAMPLES
Illustration — Illustration 1 — Full 15-year holiday
Facts. F Ltd commenced SEZ unit 1-April-2018; export income Rs 100 cr in Year 1.
Computation.
Pre-sunset commencement (1-April-2018 < 1-April-2020).
Section 10AA(1)(i) — 100% deduction for first 5 AYs (2019-20 to 2023-24).
Years 6-10 — 50% deduction; Years 11-15 — 50% subject to SEZ Reinvestment Reserve.
Result. Full graded 15-year holiday available.
Illustration — Illustration 2 — Post-sunset commencement
Facts. G Ltd commenced SEZ unit 1-July-2020.
Computation.
Commencement after sunset 1-April-2020.
Section 10AA NOT available.
Alternative — section 80-IA / 80-IAC (start-up) if eligible.
Concessional regime under section 115BAB (manufacturing) may apply if conditions met.
Result. Outside sunset; alternative regimes needed.
Illustration — Illustration 3 — SEZ Reinvestment Reserve
Facts. H Ltd in Year 11; SEZ profit Rs 50 cr; wants 50% deduction.
Computation.
Section 10AA(1)(iii) — Year 11-15 deduction requires SEZ Reinvestment Reserve creation.
Reserve = lower of (a) 50% of SEZ profit; (b) amount actually credited to SEZ Reinvestment Reserve account in books.
Reserve must be utilised for SEZ-related fresh investments within 3 years.
Result. Reserve-creation precondition for Year 11-15 deduction.
Illustration — Illustration 4 — Cessation of SEZ status
Facts. I Ltd's SEZ de-notified in Year 12; ongoing s. 10AA claim.
Computation.
Section 10AA conditional on continuing SEZ unit status.
De-notification breaks the eligibility.
Pro-rata deduction for partial year; subsequent years denied.
Refund of past deductions may be triggered if breach is structural (e.g., diversion of unit out of SEZ).
Result. De-notification breaks deduction continuity.
Illustration — Illustration 5 — MAT applicability (s. 115JB)
Facts. J Ltd's SEZ profits exempt under s. 10AA; total income negligible after deduction.
Computation.
Pre FA 2011: SEZ income exempt for s.
115JB MAT computation.
Post FA 2011 (s.
115JB(6)): SEZ income INCLUDED in book profit for MAT.
MAT @ 15% applies on SEZ profits + other income.
SEZ tax holiday subject to MAT undertow.
Result. Post FA 2011 — MAT applies to SEZ book profits.
PRACTITIONER PLANNING NOTES
■ TP planning starts at structure design — substance > paperwork.
■ AE definition includes both equity test (>=26%) and de-facto control test.
■ Specified Domestic Transaction (SDT) — currently narrowed post-FA 2017 (only specific cases).
■ Most appropriate method (MAM) selection critical; document why selected over others.
■ TNMM most common for routine functions; CUP best where comparables available.
■ Profit Split (PSM) for highly integrated / unique-asset transactions.
■ Safe Harbour — lower compliance cost; tighter margin bands.
■ APA — Unilateral / Bilateral / Multilateral; certainty for 5 years + 4 roll-back.
■ MAP — government-to-government dispute resolution; competent authority.
■ DRP — alternative to direct CIT(A) for TP additions (section 144C).
■ Master File (Rule 10DA) — Rs 50 cr international transaction OR Rs 500 cr revenue.
■ CbCR (Rule 10DB) — Rs 5,500 cr consolidated revenue.
■ OECD Guidelines 2022 — interpretive aid; not binding but persuasive.
■ Engineering Analysis ratio — narrow construction; royalty / FTS definitions strict.
■ Documentation 8 years — contemporaneous + indexed + signed.
LITIGATION DEFENCE
■ Mathuram Agrawal — strict construction of charging / TP-deeming provisions.
■ Vodafone International — look-at primacy; corporate-form respected absent sham.
■ Engineering Analysis — narrow royalty / FTS definitions for cross-border payments.
■ GE India — withholding obligation only if income is chargeable to tax in India.
■ Azadi Bachao — treaty benefits available; LOB / MLI PPT independently checked.
■ Section 92(3) — ALP shall not apply if reduces taxable income / increases loss.
■ Section 92C(2) — most appropriate method selection — taxpayer's choice respected if reasoned.
■ Section 92C(2) proviso — +/-1% (wholesale traders) / +/-3% range — statutory tolerance.
■ Comparability adjustments — economic / functional / contractual adjustments permitted.
■ Use of multi-year data — Rule 10B(4) — current year + prior 2 years.
■ Internal comparables preferred over external where available.
■ TPO order under 92CA(3) — challenge before DRP / CIT(A) / ITAT.
■ DRP order — finality; direct appeal to ITAT u/s 253(1)(d).
■ APA / MAP — alternative dispute resolution paths.
■ Section 92E Form 3CEB — Certified Accountant report; substantive defence document.
■ TP documentation 8 years — Rule 10D — bona-fide documentation defence.
STEP-BY-STEP PROCEDURE — 15 STEPS
Step 1. Identify international transaction / SDT
Determine if transaction is between AEs (s. 92A) and is an international transaction (s. 92B) or SDT (s. 92BA).
Step 2. Determine functions / risks / assets (FAR)
Document functions performed, assets used, risks assumed by each party.
Step 3. Select Most Appropriate Method (MAM)
Per Rule 10B — CUP / RPM / CPM / PSM / TNMM / Other; justify selection.
Step 4. Identify comparables
Internal first, then external; databases (Prowess, Capitaline, BvD Orbis).
Step 5. Compute ALP
Apply selected MAM to comparables; arithmetic mean +/- tolerance band.
Step 6. Prepare TP documentation
Rule 10D — contemporaneous documentation; FAR analysis + comparables + computation.
Step 7. Master File / CbCR (if applicable)
Rule 10DA / 10DB — Forms 3CEAA / 3CEAC; thresholds Rs 50 cr / Rs 5,500 cr.
Step 8. File Form 3CEB
Section 92E — TP audit report; due 31-October with assessment.
Step 9. Return + Schedule TP
Income computed at ALP; Schedule TP discloses transactions + adjustments.
Step 10. Scrutiny — section 143(2)
If AO selects for TP scrutiny, refers to TPO u/s 92CA(1).
Step 11. TPO proceedings (s. 92CA(3))
TPO determines ALP; passes order within 60 days before assessment time-bar.
Step 12. Draft assessment order
AO incorporates TPO order; passes draft order under section 144C(1).
Step 13. DRP route (s. 144C)
Assessee may file objections to DRP within 30 days; DRP order final, binding on AO.
Step 14. ITAT appeal (s. 253(1)(d))
Direct appeal to ITAT against assessment incorporating DRP / TPO order.
Step 15. Further appeal / APA / MAP
HC u/s 260A; SC u/s 261; APA u/s 92CC; MAP under treaty Article 25.
PRACTITIONER CHECKLIST — 19 ITEMS
PRACTITIONER CHECKLIST
☐ AE relationship documented (s. 92A — equity / control test).
☐ International transaction / SDT identified (s. 92B / 92BA).
☐ FAR analysis prepared (functions / assets / risks).
☐ Most appropriate method (MAM) selected with reasoning (Rule 10B).
☐ Comparables search documented (search criteria, rejection rationale).
☐ ALP computation worked out (arithmetic mean +/- tolerance).
☐ Multi-year data used where applicable (Rule 10B(4)).
☐ Rule 10D contemporaneous documentation prepared.
☐ Master File (Form 3CEAA) — Rule 10DA threshold check.
☐ CbCR (Form 3CEAC) — Rule 10DB threshold check.
☐ Form 3CEB filed by 31-October (s. 92E).
☐ Schedule TP filled in return.
☐ Safe Harbour eligibility checked (Rules 10TA-10TG).
☐ APA / Bilateral APA consideration for large recurring transactions.
☐ TPO order received, analysed; 92CA(3) order in time.
☐ Draft assessment order received; DRP option evaluated (30-day clock).
☐ DRP objections filed; final order in time-bar.
☐ Documentation 8 years preserved.
☐ MAP / Article 25 — competent authority access if treaty available.
CROSS-REFERENCES (28+)
CROSS-REFERENCES
▸ Section 10 — Master exemption-incomes anchor.
▸ Section 10A — FTZ undertakings (sunset AY 2010-11).
▸ Section 10AA — SEZ units (active tax holiday).
▸ Section 10B — 100% EOU deduction (sunset AY 2010-11).
▸ Section 10BA — Hand-made carpet industry (sunset).
▸ Section 10BB — Computer programmes production (sunset).
▸ Section 10C — NE region industrial undertakings (sunset).
▸ Section 11 — Trust income exemption (charitable / religious).
▸ Section 12 — Voluntary contributions to trust.
▸ Section 12A — Conditions for s. 11/12 applicability.
▸ Section 12AA — Legacy trust registration framework (pre-FA 2020).
▸ Section 12AB — Current fresh-registration framework (FA 2020 onward).
▸ Section 12AC — Specified-violation framework for trusts.
▸ Section 13 — Trust forfeiture grounds.
▸ Section 13A — Political party exemption.
▸ Section 13B — Electoral trust exemption.
▸ Section 80-IA — Infrastructure / industrial undertakings deduction.
▸ Section 80-IAB — SEZ developer deduction.
▸ Section 80-IAC — Start-up companies deduction.
▸ SEZ Act 2005 — companion legislation for s. 10AA framework.
▸ FEMA 1999 — Forex framework for SEZ / EOU.
▸ Companies Act 2013 — Section 8 companies (non-profit framework).
▸ Income-tax Act, 2025 — Section 536 saving for legacy claims.
▸ Rule 16D / 16E — SEZ machinery rules.
▸ Form 10AB / Form 10A — Trust registration forms (under s. 12AB framework).
▸ Form 56F — SEZ-related compliance form.
▸ Section 115BBC — Anonymous donations to trusts.
▸ Section 115TD — Trust accreted income (exit tax).
▸ PMLA 2002 — Political-party / electoral-trust money laundering aspects.
▸ Representation of the People Act 1951 — Political party framework.
▸ FCRA 2010 — Foreign Contribution Regulation (for trusts).