STATUTORY ARCHITECTURE — 18-ROW MAP
Case law on Section 92BA
ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.
92BA
ITA 1961 · Section 92BA
ITA 1961 · Section 92BA
STATUTORY ARCHITECTURE — 18-ROW MAP
ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.
Function in the statutory architecture
Section 92BA defines "specified domestic transaction" for ss. 92, 92C, 92D and 92E. It covers the following transactions of an assessee, not being international transactions: transactions referred to in s. 80A; transfers of goods or services referred to in s. 80-IA(8); business transacted with another person as referred to in s. 80-IA(10); transactions under any other section of Chapter VI-A or s. 10AA to which s. 80-IA(8) or (10) applies; business transacted between the persons referred to in s. 115BAB(6) or between the assessee and the other person referred to in s. 115BAE(4); and any other prescribed transaction.
These transactions are specified domestic transactions only where their aggregate in the previous year exceeds twenty crore rupees. Clause (i) is shown as "[***]", meaning it has been omitted.
Operative consequences
Status
Operative for assessment year 2026-27. Clause (vb) carries the note "Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024". The Finance Act, 2026 does not amend this section.
The 1961 Act governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards, and for this subject the 2025 Act provision is s. 164. The Finance Act, 2026 omitted the words "or section 144" from s. 164(d).
Case Laws & Commentary
SECTION 92BA — MEANING OF SPECIFIED DOMESTIC TRANSACTION
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 92BA, inserted by the Finance Act, 2012 w.e.f. 1 April 2013, extended the arm's length discipline to certain DOMESTIC related-party transactions — the 'specified domestic transaction' (SDT). It was the legislative response to the Supreme Court's suggestion in CIT v. Glaxo SmithKline Asia (P) Ltd. that the TP machinery be extended to related domestic dealings to reduce litigation over reasonableness under s.40A(2) and over profit-shifting between tax-holiday and non-holiday units.
An SDT is a transaction (not being an international transaction) of a specified kind whose aggregate value in the previous year exceeds the monetary threshold (originally Rs.5 crore; raised to Rs.20 crore by the Finance Act, 2015 w.e.f. AY 2016-17). Critically, clause (i) — which had brought s.40A(2)(b) expenditure (related-party payments) within the SDT net — was OMITTED by the Finance Act, 2017 w.e.f. 1 April 2017, sharply narrowing the section's reach. Courts have held the omission obliterates clause (i) ab initio (no saving clause), so pending adjustments under it fail.
A.2 Sub-section / clause taxonomy
Opening words: 'Specified domestic transaction' in the case of an assessee means any of the following transactions, not being an international transaction, namely:—
Clause (i) [OMITTED by FA 2017 w.e.f. 1-4-2017]: Originally — any expenditure in respect of which payment has been made or is to be made to a person referred to in s.40A(2)(b). Its omission removed related-party expenditure from the SDT/TP net.
Clause (ii)-(iv) [tax-holiday transfers]: Transactions referred to in s.80A; transfer of goods or services referred to in s.80-IA(8); business transacted referred to in s.80-IA(10) — i.e. inter-unit transfers and close-connection business between an eligible (tax-holiday) undertaking and other businesses/persons.
Clause (v): Any transaction referred to in any other section under Chapter VI-A or s.10AA to which s.80-IA(8) or (10) applies.
Clauses (va) and (vb): Any business transacted between the persons referred to in s.115BAB(6) (clause (va)); and any business transacted between the assessee and other person as referred to in s.115BAE(4) (clause (vb), inserted by the Finance Act, 2023 w.e.f. 1-4-2024).
Clause (vi): Any other transaction as may be prescribed; and the aggregate-value threshold (Rs.20 crore w.e.f. AY 2016-17) applies to all of the above taken together.
A.3 Core doctrinal themes
Theme (1) — Effect of omission of clause (i): the dominant judicial view (Texport Overseas) is that the omission of clause (i) without a saving clause means it is treated as never having existed, so TP references/adjustments founded on clause (i) lapse even for years before AY 2017-18 still pending.
Theme (2) — Tax-holiday profit-shifting: the surviving clauses target the shifting of profits into s.80-IA/80-IB/80-IC/10AA units via non-arm's-length inter-unit transfers, applying the 'market value' / arm's length standard of s.80-IA(8) and the 'more than ordinary profits' rule of s.80-IA(10).
Theme (3) — Threshold and documentation: SDTs attract the same s.92C method analysis, s.92D documentation and s.92E (Form 3CEB) reporting as international transactions, once the aggregate threshold is crossed.
A.4 Legislative evolution / Finance Act amendment trail
FA 2012 (w.e.f. 1-4-2013): Section 92BA inserted following Glaxo SmithKline (SC); SDT regime created with a Rs.5 crore threshold.
FA 2015 (w.e.f. AY 2016-17): Aggregate threshold raised from Rs.5 crore to Rs.20 crore.
FA 2017 (w.e.f. 1-4-2017): Clause (i) [s.40A(2)(b) expenditure] OMITTED — the most significant narrowing of the section.
FA 2026: No amendment to s.92BA; post-2017 scope (tax-holiday transfers and the business referred to in ss.115BAB(6) and 115BAE(4) under clauses (va) and (vb)) preserved.
A.5 CA practitioner pointers
(1) For AYs up to 2016-17 still under assessment/appeal, take the Texport Overseas point — adjustments resting on the omitted clause (i) (s.40A(2)(b) payments) are unsustainable.
(2) From AY 2017-18, SDT scrutiny centres on tax-holiday inter-unit transfers (ss.80-IA(8)/(10), 80-IB/IC, 10AA); clauses (va) and (vb) also cover business transacted between the persons referred to in s.115BAB(6) and between the assessee and other person as referred to in s.115BAE(4). Benchmark inter-unit transfer prices at market value and document the basis.
(3) Apply the Rs.20 crore aggregate test across all qualifying SDTs; if crossed, file Form 3CEB and keep Rule 10D documentation for the domestic transactions too.
B. FA 2026 IMPACT NOTE
Section 92BA is NOT amended by the Finance Act, 2026. The SDT definition (as narrowed by the FA 2017 omission of clause (i)) continues to apply up to AY 2026-27.
Practitioners should remember that the FA 2017 omission is historic, not an FA 2026 change; its retrospective-obliteration effect (Texport Overseas) governs all open pre-2017 SDT matters.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Effect of omission of clause (i) — provision treated as never existing
1. Pr. CIT v. Texport Overseas (P) Ltd. (2019) 114 taxmann.com 568 / 271 Taxman 170 (Karnataka)
Facts: For an AY before 2017-18, the TPO made an SDT adjustment under s.92BA(i) on related-party (s.40A(2)(b)) payments. After the Finance Act, 2017 omitted clause (i) w.e.f. 1-4-2017, the assessee contended that the reference and adjustment could not survive.
Issue: Whether the omission of s.92BA(i) by FA 2017, without a saving clause, invalidates assessments/adjustments made under that clause for earlier years still pending.
Held: The Karnataka High Court (affirming the ITAT Bangalore order dated 22-12-2017) held that an 'omission' (as distinct from a 'repeal') of a provision without a saving clause results in the provision being treated as if it never existed; relying on Kolhapur Canesugar Works Ltd. v. UOI, the Court held that the TPO's reference and adjustment under the omitted clause (i) were invalid and the addition was to be deleted.
Ratio: Omission of clause (i) of s.92BA without a saving clause obliterates it ab initio; proceedings founded on it cannot be continued or initiated.
Relevance: The leading SDT authority. Decisive for all open pre-AY 2017-18 SDT adjustments resting on s.40A(2)(b) payments.
Cluster C-2 : Legislative origin — extension of ALP to domestic related-party dealings
2. CIT v. Glaxo SmithKline Asia (P) Ltd. (2010) 195 Taxman 35 / 236 CTR 113 (SC)
Facts: A dispute over the reasonableness of payments between domestic related parties under s.40A(2). The Supreme Court, dealing with the difficulty of adjudicating 'fair market value' of related-party domestic transactions, made observations on the need for a structured mechanism.
Issue: Whether the law should provide a transfer-pricing-type machinery for domestic related-party transactions to reduce litigation under s.40A(2) and profit-shifting between units.
Held: The Supreme Court suggested that the Ministry of Finance consider extending transfer-pricing regulations to domestic transactions between related parties, to bring objectivity to the determination of arm's length consideration and to curb profit-shifting into tax-holiday units.
Ratio: Provided the policy impetus for the SDT regime; directly led to the insertion of s.92BA by FA 2012.
Relevance: Essential context for s.92BA; explains the section's purpose and the s.80-IA(8)/(10) linkage.
D. PRACTITIONER'S NOTE
Open-year strategy: for any pending SDT adjustment under the erstwhile clause (i), raise Texport Overseas at the earliest stage — the omission is jurisdictional, not merely a quantum issue.
Going-forward compliance: focus SDT documentation on tax-holiday units — inter-unit transfer pricing at market value (s.80-IA(8)) and arm's length where there is a close connection producing more than ordinary profits (s.80-IA(10)). Aggregate all qualifying SDTs against the Rs.20 crore threshold and file Form 3CEB if crossed.
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.