Section 163 — International Transaction | ITA 2025

Section 163 — - MEANING OF INTERNATIONAL TRANSACTION

Section 163 is the substantive equivalent of 1961 s. 92B -- the definition of INTERNATIONAL TRANSACTION for TP scope. The definition is broad: any transaction between TWO OR MORE ASSOCIATED ENTERPRISES, either or both of whom are NON-RESIDENTS, in nature of (a) purchase / sale / lease of tangible / intangible property; (b) provision of services; (c) lending / borrowing of money; (d) any other transaction having a bearing on profits / income / losses / assets. The FA 2012 retrospective Explanation expanded 'intangible property' to include marketing intangibles / human capital / financial intangibles / customer-related intangibles / location-based intangibles / methods / programmes / systems -- the BEPS-aligned super-broad list. Deemed-international-transaction (sub-s. 2): transaction between an enterprise and an unrelated person, but where the unrelated person and AE have prior arrangement -- treats third-party transaction as international transaction (anti-back-to-back / chain-of-transactions anti-abuse).

Statutory text — Income-tax Act, 2025

Marginal note -- Meaning of international transaction

( 1) For the purposes of this Chapter, the expression “international transaction” means a transaction between two or more associated enterprises, one of which is necessarily a non-resident, and includes—

(a) the purchase, sale, transfer, lease or use of tangible property, including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing;

(b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature;

(c) capital financing, lending or borrowing of money, including,—

(i) any type of long-term or short-term borrowing, lending or guarantee; or

(ii) purchase or sale of marketable securities; or

(iii) any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;

(d) provision of services, including provision of market research, market development, marketing management, administration, technical ser- vice, repairs, design, consultation, agency, scientific research, legal or accounting service;

(e) a transaction of business restructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has any bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date;

(f) a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution

19. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause (c) read as under : “(c) other units, undertakings, enterprises or business of such assessee, or other person referred to in section 140(13) in respect of a transaction referred to in section 144 or the transactions referred to in Chapter VIII to which the provisions of section 140(9) or (13) of this Act or section 80-IA(8) or (10) of the Income-tax Act, 1961 (43 of 1961) are applicable.” 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;

(g) any other transaction having a bearing on the profits, income, losses or assets of such enterprises.

(2) A transaction entered into by an enterprise with a person other than an associ- ated enterprise (“other person”) shall, for sub-section (1), be deemed to be an international transaction entered into between two associated enterprises, if—

(a) there exists a prior agreement in relation to the relevant transaction between such other person and the associated enterprise; or

(b) the terms of the relevant transaction are determined, in substance, between such other person and the associated enterprise, and the enterprise or the associated enterprise or both of them are non-residents, irrespective of whether the other person is a non-resident or not.

(3) The expression “intangible property” shall include:—

(a) marketing related intangible assets, such as, trademarks, trade names, brand names, logos;

(b) technology related intangible assets, such as, process patents, patent applications, technical documentation such as laboratory notebooks, technical know-how;

(c) artistic related intangible assets, such as, literary works and copyrights, musical compositions, copyrights, maps, engravings;

(d) data processing related intangible assets, such as, proprietary computer software, software copyrights, automated databases, and integrated circuit masks and masters;

(e) engineering related intangible assets, such as, industrial design, product patents, trade secrets, engineering drawing and schematics, blueprints, proprietary documentation;

(f) customer related intangible assets, such as, customer lists, customer contracts, customer relationship, open purchase orders;

(g) contract related intangible assets, such as, favourable supplier, contracts, licence agreements, franchise agreements, non-compete agreements;

(h) human capital related intangible assets, such as, trained and organised work force, employment agreements, union contracts;

(i) location related intangible assets, such as, leasehold interest, mineral exploitation rights, easements, air rights, water rights;

(j) goodwill related intangible assets, such as, institutional goodwill, pro- fessional practice goodwill, personal goodwill of professional, celebrity goodwill, general business going concern value;

(k) methods, programmes, systems, procedures, campaigns, surveys, studies, forecasts, estimates, customer lists, or technical data;

(l) any other similar item that derives its value from its intellectual content rather than its physical attributes. Meaning of specified domestic transaction.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 163	INCOME-TAX ACT, 1961 -- s. 92B
s. 163(1) -- transaction between AEs, either / both NR; tangible / intangible / services / loans / other	1961 s. 92B(1)
s. 163(2) -- deemed international transaction with unrelated person under prior-arranged terms with AE	1961 s. 92B(2)
Intangible property expanded list (FA 2012)	1961 s. 92B Explanation [FA 2012]

STATUTORY ARCHITECTURE

ELEMENTS: (i) Two or more associated enterprises (s. 162); (ii) Either or both NR (key distinguishing element from specified domestic transaction in s. 164); (iii) Transaction in NATURE OF: (a) purchase / sale / lease tangible / intangible property; (b) provision of services; (c) lending / borrowing money; (d) any other transaction having bearing on profits / income / losses / assets. INTANGIBLE PROPERTY (FA 2012 Explanation -- now sub-s. 1 component): expanded to include MARKETING INTANGIBLES (brand names / trademarks / customer lists / channels); HUMAN CAPITAL (workforce in place / employment contracts); FINANCIAL INTANGIBLES (financial models); CUSTOMER-RELATED (customer relationships); LOCATION-BASED (location-savings / location-rents); METHODS / PROGRAMMES / SYSTEMS (procedures); various others. The expansion was post-Vodafone / Maruti Suzuki AMP litigation -- ensuring marketing-intangibles / brand-building expenditure falls within TP scope. DEEMED-INTERNATIONAL-TRANSACTION (sub-s. 2): if assessee has transaction with UNRELATED PERSON, but the unrelated person AND AE have PRIOR ARRANGEMENT (back-to-back), the transaction is deemed international transaction. Anti-conduit / anti-chain-transaction rule. Practitioner: assessees often miss this -- third-party-distributor with AE-supplier prior arrangement triggers TP.

CASE LAW

(i) Maruti Suzuki India v. CIT (SC, 2010) -- AMP expenses; FA 2012 Explanation post-litigation. (ii) Sony Ericsson Mobile Communications v. CIT (Del HC, 2015) -- AMP-as-international-transaction; complex commentary. (iii) LG Electronics India v. CIT (ITAT Spec Bench) -- bright-line test for AMP. (iv) Vodafone India Services v. UoI (Bom HC) -- share issue NOT international transaction; capital structuring outside TP. (v) Yum Restaurants India v. ACIT -- royalty / brand-fee TP scrutiny.

CROSS-REFERENCES

Section 161 -- TP charging.
Section 162 -- Associated enterprise.
Section 164 -- Specified domestic transaction.
Section 165 -- ALP.
Income-tax Rules, 2026 r. 10A / 10D -- AE-mapping / documentation.

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