Section 92B — Definition of International Transaction

Case Laws & Commentary

SECTION 92B — MEANING OF INTERNATIONAL TRANSACTION

Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)

A. SECTION COMMENTARY

A.1 Structural position & legislative purpose

Section 92B defines 'international transaction' — the subject-matter of the TP code. It means a transaction between two or more AEs, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, provision of services, lending or borrowing of money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and includes a mutual cost/expense-allocation arrangement. Sub-section (2) deems a transaction with an unrelated third party to be an international transaction with the AE where there is a prior agreement between the AE and the third party, or where the terms are determined in substance between them.

The Explanation inserted by the Finance Act, 2012 (retrospectively w.e.f. 1-4-2002) clarifies and expands the scope, enumerating capital financing, guarantees, business restructuring/reorganisation (whether or not it has a bearing on profit at the time), and a wide meaning of 'intangible property'. This retrospective widening is the source of much of the AMP-expenditure controversy and the marketing-intangible litigation.

A.2 Sub-section / clause taxonomy

Sub-section (1): Defines 'international transaction' as a transaction between AEs (one or both non-resident) in the nature of purchase/sale/lease of tangible or intangible property, provision of services, lending/borrowing of money, or any other transaction having a bearing on profits, income, losses or assets, including a mutual cost/expense-sharing arrangement.

Sub-section (2): Deeming rule — a transaction entered into with a person other than an AE is deemed to be a transaction with the AE if there exists a prior agreement in relation thereto between the other person and the AE, or the terms are determined in substance between such other person and the AE (whether or not the other person is a non-resident).

Explanation (FA 2012, retrospective): Clause (i) illustrates the kinds of transactions covered — (a) purchase/sale/transfer/lease/use of tangible property; (b) of intangible property; (c) capital financing including borrowing/lending, guarantee, deferred payment/receivable, any debt arising in the course of business; (d) provision of services; (e) business restructuring or reorganisation, irrespective of whether it has a bearing on profit/income/loss/assets at the time. Clause (ii) gives an expansive meaning of 'intangible property' (marketing, technology, artistic, data-processing, human-capital, location, goodwill and similar intangibles).

A.3 Core doctrinal themes

Theme (1) — AMP expenditure / marketing intangibles: the central modern controversy is whether unilateral advertisement, marketing and promotion (AMP) spend by an Indian distributor/manufacturer, alleged to build the foreign AE's brand, is an 'international transaction' under s.92B. The Delhi High Court rejected the 'bright line test' (BLT) as a basis for inferring such a transaction (Sony Ericsson) and held that, absent an agreement or arrangement obliging the assessee to incur AMP for the AE, no international transaction exists (Maruti Suzuki; Whirlpool; Bausch & Lomb).

Theme (2) — Retrospective Explanation: the FA 2012 Explanation widened scope with effect from 2002; courts have held that the Explanation does not, by itself, create an international transaction where none exists — it clarifies categories, but the foundational requirement of a 'transaction' between AEs (i.e. mutual agreement/arrangement) must still be shown.

Theme (3) — Deemed transactions via third parties: sub-section (2) catches back-to-back arrangements routed through unrelated parties where terms are dictated by the AE.

A.4 Legislative evolution / Finance Act amendment trail

FA 2001 (w.e.f. 1-4-2002): Section 92B introduced.

FA 2002: Sub-section (2) deeming rule refined.

FA 2012 (retrospective w.e.f. 1-4-2002): Explanation inserted — expansive enumeration of covered transactions (capital financing, guarantees, business restructuring) and a wide definition of intangible property.

FA 2014/2015: Range concept and use of multiple-year data introduced at the computation stage (s.92C/Rules), affecting how 92B transactions are benchmarked.

FA 2026: No amendment to s.92B.

A.5 CA practitioner pointers

(1) Identify and report every category of dealing in Form 3CEB — including the FA 2012-clarified categories: guarantees, intra-group loans/receivables, deferred receivables, and business-restructuring transactions.

(2) On AMP, do not concede an 'international transaction' merely because AMP/sales ratio exceeds comparables (BLT is dead after Sony Ericsson). Test whether any agreement/arrangement obliges the assessee to promote the AE's brand; if none, rely on Maruti Suzuki / Whirlpool / Bausch & Lomb.

(3) Outstanding receivables from AEs beyond agreed credit periods can be a separate international transaction (interest imputation) — benchmark and document the credit policy.

B. FA 2026 IMPACT NOTE

Section 92B is NOT amended by the Finance Act, 2026. The definition of 'international transaction', including the FA 2012 Explanation, continues for AY 2026-27 onward.

The AMP / marketing-intangible jurisprudence below remains the governing position; FA 2026 introduces no statutory 'AMP transaction' and no BLT.

C. CASE LAW — CLUSTERED BY ISSUE

Cluster C-1 : AMP expenditure — rejection of the Bright Line Test

1. Sony Ericsson Mobile Communications India (P) Ltd. v. CIT (2015) 374 ITR 118 (Delhi)

Facts: A batch of appeals by Indian distributors of MNC brands. The TPO treated the excess of the assessees' AMP expenditure over a 'bright line' (the AMP/sales ratio of comparables) as expenditure incurred to build the foreign AE's brand, and made TP adjustments with a mark-up.

Issue: Whether the Bright Line Test can be used to determine the existence of, or to benchmark, an international transaction involving AMP expenditure.

Held: The Delhi High Court held that the Bright Line Test has no statutory mandate and cannot be used either to infer the existence of an international transaction or to compute its ALP. For distributors, AMP and distribution functions can be aggregated and benchmarked together under an appropriate method; an artificial BLT segregation is impermissible.

Ratio: BLT is not a legitimate method under the Act/Rules; AMP cannot be carved out and adjusted on a bright-line basis.

Relevance: The foundational AMP decision; starting point for all AMP litigation.

2. Maruti Suzuki India Ltd. v. CIT (2016) 381 ITR 117 (Delhi)

Facts: The assessee was a manufacturer (not a mere distributor). The TPO treated the 'excess' AMP spend as an international transaction benefiting the foreign AE's brand and made an adjustment.

Issue: Whether unilateral AMP expenditure by an Indian manufacturer is an 'international transaction' under s.92B absent any agreement/arrangement with the AE.

Held: The Delhi High Court held that there must first exist an international transaction — i.e. an agreement, understanding or arrangement between the assessee and the AE for the assessee to incur AMP for the AE. The Revenue cannot infer such a transaction merely from the quantum of AMP or from BLT. On the facts, no such transaction was shown; the adjustment was deleted.

Ratio: Existence of an international transaction is a precondition; it cannot be presumed from AMP quantum. Distinguished Sony Ericsson (which concerned distributors).

Relevance: Leading authority for manufacturers; the burden is on the Revenue to demonstrate an actual arrangement.

3. Whirlpool of India Ltd. v. CIT (2016) 381 ITR 154 (Delhi)

Facts: AMP adjustment made on a manufacturer/distributor on the basis that high AMP built the foreign brand.

Issue: Whether AMP spend constitutes an international transaction without a demonstrated arrangement.

Held: Following Maruti Suzuki, the Delhi High Court held that the Revenue must establish, by tangible material, the existence of an agreement/arrangement obliging the assessee to incur AMP for the AE; mere incurring of AMP, even if high, does not create an international transaction. Adjustment deleted.

Ratio: No international transaction can be inferred from the existence of AMP expenditure alone.

Relevance: Part of the consistent Delhi High Court line rejecting AMP adjustments absent an arrangement.

4. Bausch & Lomb Eyecare (India) (P) Ltd. v. ACIT (2016) 381 ITR 227 (Delhi)

Facts: AMP adjustment on a distributor of contact-lens products; Revenue relied on the AMP/sales ratio.

Issue: Whether AMP expenditure is an international transaction and can be benchmarked using BLT.

Held: The Delhi High Court reiterated that, in the absence of a machinery provision and an actual transaction/arrangement with the AE, AMP expenditure cannot be treated as an international transaction; BLT cannot supply the missing transaction. Adjustment deleted.

Ratio: Confirms the no-arrangement-no-transaction principle and the absence of any machinery to charge AMP.

Relevance: Completes the Delhi High Court quartet (Sony Ericsson, Maruti Suzuki, Whirlpool, Bausch & Lomb) on AMP.

Cluster C-2 : Share-capital and capital-account dealings

5. Vodafone India Services (P) Ltd. v. Union of India (2014) 368 ITR 1 (Bom.)

Facts: Issue of shares at a premium to a non-resident AE; Revenue treated the premium shortfall as an international transaction giving rise to income and notional interest.

Issue: Whether the issue of shares at a premium is an 'international transaction' that can be subjected to TP adjustment under s.92B read with s.92.

Held: The Bombay High Court held that, although reported in Form 3CEB, a capital-account share issuance yields no income; in the absence of a charging provision, the alleged shortfall in premium is not amenable to TP adjustment.

Ratio: A capital-account transaction yielding no income falls outside the operative reach of Chapter X notwithstanding that it is between AEs.

Relevance: Read with s.92 Cluster C-1; settles the treatment of equity infusions.

D. PRACTITIONER'S NOTE

AMP defence file: (1) confirm there is no written or implied agreement obliging AMP spend for the AE; (2) characterise the assessee (manufacturer vs. limited-risk distributor) — Maruti Suzuki for manufacturers, Sony Ericsson aggregation for distributors; (3) resist BLT in every forum as having 'no statutory mandate'; (4) keep the marketing strategy and brand-ownership documentation to show AMP serves the assessee's own sales.

Other 92B exposures to benchmark proactively: corporate guarantees, intra-group loans, and AE receivables outstanding beyond the agreed credit period (interest imputation). Report all in Form 3CEB to avoid s.271AA exposure even where the assessee contends there is no adjustment.

Caveat: This material is treatise-style commentary for practitioners and academic use. It is not legal opinion. Verify the current text, the latest CBDT circulars/notifications and the most recent appellate position before relying on any proposition in assessment, audit (Form 3CEB) or litigation.