Section 164 — Specified Domestic Transaction | ITA 2025

Section 164 — - MEANING OF SPECIFIED DOMESTIC TRANSACTION

Section 164 is the substantive equivalent of 1961 s. 92BA -- the definition of SPECIFIED DOMESTIC TRANSACTION (SDT) bringing certain DOMESTIC AE-style transactions into the TP net. SDT was originally introduced FA 2012 to address profit-shifting through s. 80-IA / 80-IC tax-holiday units (transferring goods / services to non-tax-holiday units at non-arm's-length-prices). FA 2017 substantially CURTAILED SDT by removing s. 40A(2)(b) related-party transactions from the scope (which had been the broadest trigger). Current scope is narrow: transactions between (a) tax-holiday-unit and same-group non-tax-holiday-unit; (b) transactions referred to in s. 80-IA(8)/(10) / s. 80-IB / 80-IC etc. equivalent provisions in 2025 Act; (c) other domestic profit-shielded category transactions where prescribed thresholds met. Practitioner: most domestic group-companies post-FA 2017 are OUTSIDE SDT scope; only specific tax-holiday / SEZ / 80-IA / Section 138/139 (industrial undertakings) interactions remain within.

Statutory text — Income-tax Act, 2025

Marginal note -- Meaning of specified domestic transaction

For the purposes of this Chapter, the expression “specified domestic transaction” in case of an assessee means any of the following transactions (not being an international transaction),—

(a) any transaction referred to in section 122;

(b) any transfer of goods or services referred to in section 140(9);

(c) any business transacted between the assessee and other person as referred to in section 140(13);

(d) any transaction, referred to in any other section under Chapter VIII 20 [***], to which 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;

(e) any business transacted between the persons referred to in section 205(4);

(f) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the assessee in a tax year exceeds a sum of twenty crore rupees. Determination of arm’s length price.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 164	INCOME-TAX ACT, 1961 -- s. 92BA
s. 164 -- specified domestic transaction definition (post-FA 2017 narrowed scope)	1961 s. 92BA

STATUTORY ARCHITECTURE

POST-FA 2017 narrowed scope: SDT covers transactions between domestic enterprises in nature of: (a) Cross-unit transactions between TAX-HOLIDAY unit (e.g., SEZ s. 144 of 2025 Act / s. 80-IA(4) industrial undertaking) and non-tax-holiday unit of SAME assessee or AE -- to prevent profit-shifting that would inflate exempt-unit's profit and reduce taxable-unit's. (b) Cross-unit transactions in 80-IA / 80-IB style claims (s. 80-IA(8)/(10) equivalents in 2025 Act -- e.g., s. 137-148 industrial / SEZ / housing / IFSC / inter-corporate-dividend deductions). (c) Transactions REFERRED TO under those provisions where AO has reasons to believe profits inflated by transfer-pricing arrangements. MONETARY THRESHOLD: aggregate of SDT during tax year must exceed prescribed amount (currently INR 20 crore -- raised from earlier INR 5 crore in FA 2017 narrowing). Below threshold, no SDT compliance. Pre-FA 2017 scope INCLUDED s. 40A(2)(b) related-party expenditures (covering all closely-held company transactions with directors / shareholders / relatives) -- this was the broadest and most-contested trigger; FA 2017 removed it leaving s. 40A(2)(b) compliance to general PGBP audit (Form 3CD clauses 22-23) without TP overlay.

PLANNING NOTES

(i) THRESHOLD MONITORING -- INR 20 crore aggregate SDT triggers Form 3CEB; below, no SDT compliance. (ii) SEZ / 80-IA / 80-IC INTERACTION -- maintain separate ledgers for tax-holiday vs taxable units; cross-unit transfers documented at ALP. (iii) S. 40A(2)(b) POST-FA 2017 -- relevant for general PGBP disallowance under s. 35 (now of 2025 Act) but NOT for TP-Form 3CEB; document related-party transactions in Form 3CD.

CROSS-REFERENCES

Section 161 -- TP charging.
Section 162 -- Associated enterprise.
Section 163 -- International transaction.
Section 144 -- SEZ unit (post-tax-holiday relevance).
Section 138 / 140 / 142 / 145 / 147 -- industrial / start-up / SEZ / IFSC deductions (interaction).
Section 35(d)/(e) -- partner / AOP-member disallowance (general PGBP, not SDT).

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