Section 173 — TP Definitions | ITA 2025

Section 173 — - DEFINITIONS

Section 173 supplies the definitional anchors for the TP regime (referred to throughout ss. 161, 162, 163, 165, 171, 172). Key definitions: (a) ENTERPRISE -- person engaged in business / profession including PE; (b) PERMANENT ESTABLISHMENT -- the cornerstone definition (referenced in s. 9 / DTAA / TP); (c) SPECIFIED DATE -- typically due date for s. 263(1); (d) TRANSACTION -- including arrangement / contract / understanding (broadly defined). The 'permanent establishment' definition (s. 173(c)) is FOUNDATIONAL for s. 9(5)(b) head-office bank-interest deeming and most cross-border charging.

Statutory text — Income-tax Act, 2025

Marginal note -- TP definitions

For the purposes of this section and sections 161, 162, 163, 165, 171 and 172, unless the context otherwise requires,—

(a) “arm’s length price” means a price which is applied or proposed to be applied in a transaction between persons other than associated enter- prises, in uncontrolled conditions;

(b) “enterprise” means a person (including a permanent establishment of such person) who is, or has been, or is proposed to be, engaged in any activity relating to—

(i) the production, storage, supply, distribution, acquisition or control of articles or goods; or

(ii) know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature; or

(iii) any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights; or

(iv) provision of services of any kind; or

(v) carrying out any work in pursuance of a contract; or

(vi) investment or providing loan; or

(vii) business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, whether such activity or business is carried on, directly or through one or more of its units or divisions or subsidiaries, or whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or places;

(c) “permanent establishment”, referred to in clause (b), includes a fixed place of business through which the business of the enterprise is wholly or partly carried on;

(d) “specified date” means the date one month before the due date for fur- nishing the return of income under section 263(1) for the relevant tax year;

(e) “transaction” includes an arrangement, understanding or action in concert,—

(i) whether or not such arrangement, understanding or action is formal or in writing; or

(ii) whether or not such arrangement, understanding or action is in- tended to be enforceable by legal proceeding. Avoidance of income-tax by transactions resulting in transfer of income to non-residents.

KEY DEFINITIONS

(a) ENTERPRISE -- person engaged in business / profession; includes PE-of-non-resident; sub-clause covers 'enterprise outside India' for foreign AE. (b) PERMANENT ESTABLISHMENT (s. 173(c)) -- fixed place of business through which business is carried on, wholly or partly. Referenced in s. 9(5)(b) for head-office-to-PE bank-interest deeming. PE definition typically includes: place of management; branch; office; factory; workshop; mine / quarry; building site / construction project (subject to time-thresholds in DTAAs typically 6-12 months). DAPE / Service-PE / Construction-PE per BEPS-aligned treaty articles. (c) SPECIFIED DATE -- due date u/s 263(1) for filing return; central reference for compliance deadlines. (d) TRANSACTION -- includes ARRANGEMENT / UNDERSTANDING / ACTION-IN-CONCERT, whether formal / written / oral / enforceable (broad definition to capture full economic reality). Cross-references: PE definition is also referenced in DTAA Article 5 (treaty PE), which may differ from domestic PE -- where DTAA applies, treaty PE typically prevails (most-beneficial under s. 159 / 1961 s. 90).

CROSS-REFERENCES

Section 9 -- Income deemed to accrue / arise (uses PE definition).
Section 159 / 160 -- DTAA / unilateral relief (treaty PE definition).
Section 161-172 -- TP regime (uses all definitions).
Section 263(1) -- specified date / return-filing.
OECD Model Convention Article 5 -- treaty PE.

← All sections (537)Act 2025 hub