Reproduced with permission from Transfer Pricing Forum, null, 08/21/2010.
Copyright 姝 2010 by The Bureau of
National Affairs, Inc. (800-372-1033) http://www.bna.com
India
Rahul K Mitra and Tarun Arora,
PricewaterhouseCoopers, India
T
oday’s dynamic business environment
coupled with prevailing economic uncertain-
ties in the globalised world has led to wide-
spread business restructurings by Multinational
Enterprises (MNEs). Some of the common factors
that lead to business restructurings are changes in
business opportunities, competitive pressures,
market conditions, changing operating and regula-
tory environment, etc. Business restructurings involve
re-arrangement of value chains or operations of busi-
nesses and are typically aimed at achieving opera-
tional synergies, cost savings, efficient/economical
sharing of resources, etc. by MNEs. Such restructur-
ings, apart from the business/commercial relevance,
also have significant implications for MNEs from a
taxation and transfer pricing viewpoint.
I. Transfer Pricing aspects in business
restructurings – background
In tax and transfer pricing (TP) parlance, business re-
structuring refers to cross border transfer and/or re-
deployment of functions, assets (both tangible and
intangible), and risks by MNEs between group enti-
ties operating in different jurisdictions. Business re-
structurings lead to changes in existing business
arrangements resulting in new ‘‘cross border transac-
tions’’ between multinational group entities with con-
sequential effects on profit and loss potential in each
country/tax jurisdiction. The restructuring itself may
also be a taxable event.
A. International developments
On January 1, 2008, Germany amended its tax act and
introduced rules to prevent an untaxed transfer of
profit potential from the country as a result of busi-
ness restructurings. As per this new tax law, Germany
views a business restructuring as a transfer package
which consists of assets, risks and/or functions which
are transferred across borders within a multinational
group. For valuation of such transfer package, busi-
ness opportunity, i.e. the profit potential of the com-
bined assets, risks and/or functions of the transfer
package, have to be factored into the same.
In September 2008, the Organisation for Economic
Co-operation and Development (OECD) released its
discussion draft on transfer pricing aspects of busi-
ness restructuring for public comments. The discus-
08/10 Transfer Pricing Forum BNA ISSN 2043-0760
sion draft focuses on the extent to which reallocation
of profits pursuant to a business restructuring is con-
sistent with the arm’s length principle and more gen-
erally how the arm’s length principle applies to
business restructurings.
More recently, the Australian Tax Office on June 2,
2010 has issued a draft ruling (TR 2010/D2) on appli-
cation of TP provisions to business restructurings by
multinational enterprises. The draft ruling (which in
substance follows the OECD’s discussion draft) is one
of the first examples of detailed country-specific guid-
ance on TP aspects of business restructurings.
As is evident from the above developments, the in-
ternational community has awakened to the need for
undertaking an objective evaluation of corporate re-
structuring to determine what is business driven and
what is tax driven restructuring, in case that should be
treated differently; and whether business-driven re-
structuring gives rise to a tax liability. In this respect,
tax administrations are increasingly focusing atten-
tion on profit expectations, synergy effects of restruc-
turing and the advantages of relocation, aspects that
were hitherto ignored or not examined in detail.
B. Indian transfer pricing framework
Comprehensive Transfer Pricing (TP) regulations1
were introduced in India in 2001 to prevent cross-
border shifting of profits by multinational enterprises
from India. The Indian transfer pricing regulations
aim at ensuring that the ‘‘income’’ arising from any
‘‘international transaction’’ between related parties is
determined on an arm’s length basis. Currently, there
are no specific provisions in the Indian tax or transfer
pricing regulations dealing with business restructur-
ings, however, the general transfer pricing regulations
apply where taxable income arises in the course of any
business restructuring. Although India is not an
OECD member, in several landmark rulings, the
Indian Courts have held that a reference to OECD
commentary can certainly be made where guidance in
Indian legislation is lacking. Hence, OECD Guidance
on various tax issues (including TP) promulgated
from time to time is often referred to by tax authori-
ties and taxpayers alike. Similarly, international TP
legislation and related developments also play a per-
suasive role in shaping the mindset of Indian tax au-
thorities as well as the evolution of transfer pricing
law in India.
1
II. Transfer Pricing aspects of business
restructurings – Indian perspective
In the background of some of these developments,
this paper discusses various issues pertaining to trans-
fer pricing and business restructuring under the exist-
ing Indian tax laws and transfer pricing regulations.
III. Issue One
Are there any specific tax regulations on business re-
structurings (in terms of moving activities) in India?
There are no specific tax regulations in India on
business restructurings.
IV. Issue Two
If not, then are business restructurings covered by gen-
eral, transfer pricing or intangible property regulations?
Are arrangements involving cross-border redeployment
of functions, assets and/or risks covered by such
regulations?
Unlike the German tax law, Indian transfer pricing
or tax regulations do not contain specific provisions in
relation to business restructuring or related concepts
like cost of corporate opportunities, shifting of
activities/functions, transfer of profit potential, etc.
between related enterprises. However, in order to ex-
amine the application of such provisions in the Indian
context, the scheme of the Indian tax and transfer
pricing regulations is discussed below.
The Indian transfer pricing provisions prescribe
that any income arising from an international transac-
tion shall be computed having regard to the arm’s
length price. The term ‘‘income’’ is defined very
broadly under the domestic tax law and it includes
any profits or gains. It also includes any sum, whether
received or receivable, under an agreement for not car-
rying out any activity in relation to any business.2 Fur-
ther, income also includes any capital gains arising
from transfer of a capital asset.3The definition of ‘‘capi-
tal asset’’ under the domestic tax law is very wide and
includes property of every kind.4
The term ‘‘transaction’’ under the law has been de-
fined to include:
s Any transaction having a bearing on the profits,
income, losses or assets of such enterprises5; and
s An arrangement, understanding or action in con-
cert (whether formal or in writing or whether in-
tended to be enforceable by legal proceeding or
not6).
Thus, even though there are no specific provisions
or legal precedents on business restructuring, in view
of the wide import of the general provisions in the
Indian tax law, the framework is broad enough to
cover such arrangements within its ambit and also
give tax authorities the ability to examine and ques-
tion business restructuring, including issues on valua-
tion where required. Accordingly, applicability of tax/
transfer pricing regulations to the transactions/
arrangements involving transfer/redeployment of
functions/assets/risks is an issue that needs close and
in-depth technical analysis.
08/10 Transfer Pricing Forum BNA ISSN 2043-0760
V. Issue Three
Does India impute a compensation/exit charge upon
business conversion, say from a full risk marketing dis-
tributor to limited/low risk distributor or agent, only
when there is transfer of intangibles (say marketing in-
tangibles in the form of customer list, distribution net-
work, etc.) along with flight of functions; or even if there
is mere flight of functions without any transfer of intan-
gibles attached to the functions?
A. Transfer of functions along with valuable intangibles
The Indian transfer pricing regulations, if not ex-
pressly, might impliedly require an arm’s length
compensation/exit charge to be earned by the Indian
taxpayer for transfer of functions along with transfer
of asset (whether tangible or valuable intangible).
This situation is analysed in the following example.
An Indian Company (ICo) is a wholly owned subsid-
iary of a Foreign Company (FCo). ICo operates as a
full-fledged marketing distributor for the group’s
products in India and has an exclusive right to sell in
the Indian market. Over the years, ICo has developed
significant valuable intangibles viz. development of
the local brand (for which it incurred significant expen-
diture in the past), a vast distribution network, cus-
tomer base, contractual rights, etc. As part of the
group restructuring, ICo is converted to a limited risk
distributor and accordingly, ICo transfers some/all of
the aforementioned valuable intangibles to FCo and
also agrees to discontinue such intangible creating
marketing functions/activities on its own account.
Thus, in the restructured scenario, though ICo would
continue to resell/distribute the group’s products in
India, however, the intangible creating activities as
well as the key strategic decision making functions in
relation to the Indian distribution operations would
not be undertaken by ICo. In such a situation, transfer
of the valuable marketing/distribution related intan-
gibles by ICo to FCo would require an arm’s length
compensation to be received by ICo. Such compensa-
tion as well as the pricing arrangements in the post
structuring scenario would need to take into account
while formulating the business model of the changed
‘‘limited risk distributor’’ profile of the Indian entity.
The extent, methodology and basis for arriving at the
arm’s length compensation would need to be deter-
mined based on the facts and circumstances of the
case.
Accordingly, while evaluating the applicability of
Indian transfer pricing provisions to restructurings, it
is important to examine whether the Indian taxpayer
has developed/owns any valuable intangibles, and if
yes, then the precise nature/value of such intangibles
as well as the economic interest of the Indian entity in
such intangibles needs to be determined. The determi-
nation of valuable intangibles needs to be undertaken
based on a detailed evaluation of the business value
chain and drivers, on-ground functional analysis, ex-
amination of the business realities, terms of contracts/
arrangements, etc. Where local intangibles are found
to be in existence and have been transferred by the
Indian taxpayer to a foreign related party consequent
to the restructuring, the Indian taxpayer needs to be
compensated on an arm’s length basis for such trans-
fer of intangibles.
2
B. Transfer of functions/risks without transfer of specific
intangibles attached to the functions
The Indian law does not deal in specific with the im-
plications arising from transfer of functions and/or
profit potential. However, in the backdrop of the
transfer pricing framework discussed in detail earlier,
the possibility of imputation of an exit charge/
compensation in restructurings involving only trans-
fer of functions and/or risks (without any intangibles)
cannot be ruled out. The issue that requires careful ex-
amination in such situations is whether cessation/
transfer of the performance of a function by an Indian
taxpayer has any bearing on the income and profit/
loss of the Indian entity and whether the transfer/
cessation qualifies as a taxable event/transaction
(either by virtue of it being transfer of a capital asset or
an implied agreement/arrangement for not carrying out
any activity). This situation is anlaysed in the ex-
amples below.
Example 1: ICo, an Indian distributor has an exclu-
sive right to sell the group’s products in the Indian
market. The terms of contract between ICo and the
‘‘principal’’ were such that ICo was to undertake distri-
bution for a long term. ICo does not own any other
significant valuable intangibles in relation to the dis-
tribution operations. As part of a restructuring, ICo
extinguishes/terminates this exclusive right in favor of
the ‘‘principal’’ who may now appoint additional dis-
tributors in India. ICo also agrees to discontinue the
distribution function/activities. In such a case, the
early/premature termination of ICo’s exclusive rights
under the distribution agreement/arrangement with
the ‘‘principal’’ would require an arm’s length compen-
sation to be received by ICo, if compensation would
be expected between independent parties dealing at
arm’s length in comparable circumstances.
Example 2: An Indian distributor is engaged in sell-
ing the group’s products in the Indian market. ICo’s ar-
rangement with the ‘‘principal’’ is such that it does not
have any specific ‘‘rights’’ in relation to carrying out
such distribution operations. Further, ICo does not
own any other significant valuable intangibles in rela-
tion to the distribution operations. As part of a re-
structuring, ICo ceases to carry out distribution
function/activities for the principal.
The need for compensation in such circumstances
would have to be determined based on an evaluation
of various factual parameters including, the alterna-
tive options realistically available to ICo, the extent of
‘‘investment’’ of the ICo in such functions, whether
specific benefits (if any) passed on by ICo to the prin-
cipal as a result of the restructuring would require a
compensation in third party situations, etc. In restruc-
turings involving mere transfer of functions/risks that
do not include transfer of specified property, or giving
up a right to carry out any activity (in substance) with
an active benefit to a group concern, it may be pos-
sible to take a position that the transaction does not
require a compensation. However, there is no prece-
dent on this issue and each case would need detailed
evaluation/examination depending on the facts and
circumstances of such case.
Having discussed the issue of compensation pay-
able at the time of business conversion under the
normal principles of transfer pricing, it may be pos-
3 08/10 Copyright 姝 2010 by The Bureau of National Affairs, Inc.
sible to take a stand, based on judicial precedents7,
that in case of transfer of certain self-developed intan-
gibles, e.g. customer list, dealer’s network, etc, since
the cost of acquisition of the same cannot be ascer-
tained, the computation mechanism for capital gains
income would fail, thus extinguishing the chances of
taxation. In such situations, in the absence of taxable
income, the Indian transfer pricing regulations could
be argued to be inapplicable.8
VI. Issue Four
Does India recognise ‘‘workforce-in-place’’ to itself con-
stitute an intangible, thus requiring payment of com-
pensation on its movement in the course of a business
conversion?
Movements of an assembled workforce as part of
business conversions either involving ‘‘transfer of a
bundle of intangibles’’ or arrangements for ‘‘not un-
dertaking an activity/function’’ might require an arm’s
length value of workforce-in-place to be included in
the valuation of the total bundle of assets (including
contractual rights, other assets and liabilities associ-
ated with performing particular functions).
The Indian transfer pricing regulations extend to
transactions involving transfer of intangibles. How-
ever, no specific definition of an intangible is provided
in the Indian transfer pricing regulations. The US
regulations provide that skilled workforce made avail-
able to a related party through a cost sharing arrange-
ment constitutes a distinct asset that must be
compensated separately through a buy-in payment.9
This requirement has the effect of treating an as-
sembled workforce as an intangible asset under the
US regulations. Unlike the US regulations, the Indian
regulations do not contain a specific inclusion of
‘‘workforce-in-place’’ as an intangible. In the Indian
context, it may be important to note the following
scheme of the tax/transfer pricing provisions:
s Income is defined to include any capital gain arising
from transfer of a capital asset.
s Transfer is defined to include sale, exchange or relin-
quishment of the capital asset or extinguishment of
any rights in a capital asset.
s Capital asset is defined to include property of any
kind held by a taxpayer. The word property under
the law has very wide amplitude and covers tan-
gibles, intangibles, any rights that are assignable or
are capable of specific performance, etc.
s Intangibles, though not defined in the TP regula-
tions, however, has been defined elsewhere in the
Act, for the purposes of depreciation allowance, to
encompass know-how, patents, copyrights, trade-
marks, licenses, franchises or any other business or
commercial rights of similar nature.
Further, the definition of intangibles, in common
parlance, includes assets which are capable of being
separately identified, objectively valued and capable
of producing future economic benefits. Accordingly,
the present definition of intangibles in the Indian Tax
Act may not be broad enough to cover the mere move-
ment of workforce between group concerns. There-
fore, a technical/legal position could possibly be taken
that such movement of workforce does not attract
capital gains on transfer of intangibles.
FORUM ISSN 2043-0760
 A related issue would be to examine the impact of
such movement of workforce on the transferring enti-
ty’s profit generation capability and the benefits de-
rived by the transferee entity. Some of the critical
factors to be considered in this regard from an Indian
standpoint are:-
s Careful examination of the underlying commercial
considerations viz. analysis of the business value
chain, placement of the employees on the business
value chain, analysis of the loss of future and/or al-
ternative income generation/profit potential, etc.
This would also involve examination of the fact as
to what are the alternatives available with the
Indian entity (in terms of economically utilising its
workforce) in the event transfer is originating as a
result of transfer of the activity/function being car-
ried out by such personnel prior to the restructur-
ing.
s Structure of the legal/employment contracts.
s Industry dynamics, for e.g. in specific industry set-
tings (say Information Technology/IT Enabled ser-
vices), skilled resources is critical to the operations
and success of a business.
s Manpower situation e.g. prevalent situation in the
resource market, availability, etc.
From an Indian transfer pricing point of view, it
would need to be carefully analysed that by agreeing
to surrender its rights under the employment con-
tracts and shifting valuable profit generating re-
sources, has the Indian taxpayer extended a benefit to
the overseas group concern while at the same time
leading to a reduction in its own profit generation.
Also it would need to be evaluated that in similar cir-
cumstances, would independent parties be agreeable
to a payment/service fee for giving up/providing value
generating skilled resources.
VII. Issue Five
Does India disregard business restructuring, which is
driven entirely by tax savings, without having any other
commercial justification or rationale?
Based on the available common law precedents, an
inference can be drawn that courts in India have
drawn a distinction between the two concepts; ‘‘tax
avoidance’’ and ‘‘tax evasion’’. Where a transaction has
been found to be motivated solely by the objective of
realising tax savings, the transaction may not neces-
sarily fall foul of law, provided the structure put in
place by the taxpayer has commercial substance and
is not a ‘‘sham’’.
Once the commercial substance of the transaction
i.e. the conformity of the contractual arrangements/
documentation with the reality has been demon-
strated, the courts/tax authorities cannot question the
commercial motives behind a transaction. In other
words, the tax authorities or the courts cannot be
judgmental of the commercial decisions of the tax-
payer and substitute their decision by what in their
wisdom is commercially more prudent.10
In terms of the legal basis for the above position,
reference can also be made to the provisions in India
tax treaties and transfer pricing regulations. There is
a fundamental difference between Article 9 of the
OECD Model Tax Treaty, which has been incorporated
in the majority of the tax treaties signed by India, and
08/10 Transfer Pricing Forum BNA ISSN 2043-0760
the Indian TP regulations. Article 9 provides that if
conditions are made or imposed between two related
parties in their commercial or financial relations,
which differ from those, which would be made be-
tween independent enterprises, then any profits which
would, but for those conditions, have accrued to one
of the enterprises, but, by reason of those conditions,
have not so accrued, may be included in the profits of
that enterprise and taxed accordingly. On the other
hand, the Indian transfer pricing regulations merely
require that any income arising from an international
transaction between two related parties should be
computed having regard to the arm’s length price.
Hence, prima facie, the scope of the TP regulations is
relatively narrow compared to the reach of Article 9 in
the tax treaty.
Under the Indian tax laws, a taxpayer can choose to
be governed by either a tax treaty or the Indian do-
mestic tax law, whichever is more beneficial to him.
Since the authorities ought not to judge the commer-
cial rationale of a transaction, it may not be open to
them to price the transactions based on a hypothetical
transaction which would ordinarily be expected to
exist, had the transaction been executed between in-
dependent parties. The natural corollary of the above
provisions would be that the powers of the tax au-
thorities under the TP regulations are comparatively
limited and at least surely do not extend to a review of
the commercial justification for the taxpayer’s trans-
action.
The upshot of the above discussion is that even if a
restructuring is motivated solely by tax savings it may
not be disregarded so long as the structure of the
transaction mirrors the reality and is not sham, fabri-
cated or lacks commercial substance. Hence, in this
regard, the position under Indian tax laws is in conso-
nance with the following position adopted by the
OECD in its discussion draft on business restructur-
ings: ‘‘as long as functions, assets and/or risks are actu-
ally transferred, it can be commercially rational from an
Article 9 perspective for an MNE group to restructure in
order to obtain tax savings.’’
In a recent development, the Indian Finance Minis-
ter tabled a new direct tax code (DTC), which is ex-
pected to introduce a general anti–avoidance rule
(GAAR) that would empower tax authorities to
disregard/recharacterise a transaction that lacks com-
mercial rationale/prudence. It is expected that the
DTC shall replace the existing Income Tax Act with
effect from April 1, 2011. Accordingly, once GAAR is
enacted, it would expressly empower the Indian tax
authorities to even question the commercial rationale
of a business restructuring, which the tax authorities
were hitherto not directly authorised to do under the
existing Indian transfer pricing/tax rules. Incidentally,
it is proposed that GAAR would override tax treaties.
VIII. Issue Six
Do the Indian tax authorities view risks as only trans-
ferring with the relevant people/risk managers? What do
the Indian tax authorities place more reliance on, ex-
amination of contractual terms or actual behaviour/
conduct of the parties?
The Indian transfer pricing regulations do not con-
tain any specific rules for determining allocation of
4
risks. Several Indian rulings in the past have generi-
cally endorsed the principle of aligning the economic
substance of a transaction with its contractual terms,
as laid down in the OECD Transfer Pricing Guidelines
(Paragraphs 1.25 to 1.27). Hence, for determining
how risks are distributed, Indian tax authorities
would have regard to the factual reality which essen-
tially implies examining who exercises control over
the risks or where are the ‘‘significant people func-
tions’’ located. ‘‘Control’’, in this context means the ca-
pacity to take decisions with respect to risk, e.g.
decision to put the capital at risk, whether and how to
manage the risk.
In terms of allocation of risks this, would imply that
the ‘‘significant people functions’’ must be aligned
with the contractual allocation of such risks. For ex-
ample, a business restructuring, wherein a full-
fledged distributor in India is stripped of its
significant risks (such as inventory risk, credit risk
and debtors’ risk), may not be tenable if the ‘‘signifi-
cant people functions’’ corresponding to the assump-
tion of such risks (which are claimed to have been
stripped off the Indian entity) are not actually carried
out by the principal from overseas.
If, post-restructuring the ‘‘limited risk distributor’’
continues to undertake critical decision making
activities/responsibilities pertaining to functions, e.g.
inventory management, credit evaluation and debtors’
management, then it would be open for the tax au-
thorities in India to disregard such restructuring as
sham; and attribute a higher return to the so called
‘‘limited risk distributor’’, which as per the tax authori-
ties correctly reflects the commercial reality.
Hence, while evaluating a transaction, the Indian
tax authorities may arrive at a prima-facie view based
on the contractual terms/documentation surrounding
the transaction. However, if the transaction lacks
commercial substance (e.g. the purported risk alloca-
tion is not consistent with the distribution of control
over the creation of such risks), the tax authorities can
disregard the contractual terms/arrangements and re–
price the transactions in accordance with the
business/commercial realities.
IX. Issue Seven
Are there any special/contemporaneous documentation/
reporting requirements for extraordinary transactions
and business restructurings, including justifying the ra-
tionale for business restructuring, expected benefits,
testing of the compensation paid/received, etc.?
As there are no specific rules/provisions in the
Indian tax and transfer pricing law dealing with busi-
ness restructuring and extraordinary transactions, the
Indian law does not contain any ‘‘special documenta-
tion requirements’’ in the case of business restructur-
ings. However, the Indian transfer pricing regulations
require taxpayers to maintain detailed documentation
on a contemporaneous basis in respect of any interna-
tional transaction/dealings with group companies in
order to demonstrate compliance by the Indian tax-
payer with the arm’s length standard. Such documen-
tation requirements equally apply to transactions
undertaken by taxpayers pursuant to business re-
structuring arrangements.
5 08/10 Copyright 姝 2010 by The Bureau of National Affairs, Inc.
Maintaining India specific comprehensive/robust
documentation (on a contemporaneous basis) with
respect to restructuring involving Indian operations
would be critical from an audit defense perspective.
Some of the relevant factors that should be kept in
mind while putting in place the necessary documenta-
tion for India (depending upon the facts and circum-
stances of each case), are:
s Examine and clearly document the functions,
assets and risks of the business operations subject
to restructuring, including identification of the key
value drivers of the business, which are the basis of
the profit earning capability of such business.
s Identify the scope, type and value of the interna-
tional transactions or arrangements undertaken by
the Indian taxpayer with the various associated en-
terprises involved in the business restructuring.
s Undertake detailed functional analysis under both
the pre and post restructuring business activities
and document the same. It is necessary to under-
take and capture an in-depth examination of the on-
ground business realities of the Indian taxpayer.
s It is important to ensure that the legal contracts (for
transactions post restructuring) are in line with the
on-ground realities achieved by the group after the
restructuring exercise. Agreements, while not con-
clusive on the characterisation, may be crucial in
justifying the revised structure/arrangements.
s Maintain documentation, articulating the commer-
cial rationale underlying the business restructuring
to strengthen the audit defense. Where anticipated
synergy gains are an important business reason for
the restructuring, it would be prudent to document
these gains as well as the assumptions on which
they are anticipated.
s Document the internal analysis (e.g. reports, dis-
cussions, calculations, forecasts/budgets, etc.) cap-
turing the financial effects of restructuring (costs
and anticipated benefits) as well as an evaluation of
the other options realistically available to the tax-
payer.
s A comparison and evaluation of the profits of the
Indian taxpayer before and after the restructuring,
while not mandatory, can assist in raising the qual-
ity of audit defense.
s Undertake and document an economic/
comparability analysis using available comparable
data reflecting arrangements between independent
parties in order to determine the arm’s length pric-
ing for the arrangements between the group enter-
prises as part of the business restructuring.
s Consider and document the totality of the broader
overall arrangements and financial impact arising
from other transactions undertaken as a part of
and/or consequent to the business restructuring.
s Document the comparability/benchmarking analy-
sis carried out in order to determine and demon-
strate that intra group transactions post the
restructuring exercise comply with the require-
ments of the arm’s length standard.
Rahul K Mitra is a Partner and Leader of the National Transfer
Pricing Practice at PricewaterhouseCoopers in India. He can be
contacted be email at: rahul.k.mitra@in.pwc.com
Tarun Arora is a Partner in the National Transfer Pricing
Practice at PricewaterhouseCoopers in India. He can be
contacted be email at : arora.tarun@in.pwc.com
FORUM ISSN 2043-0760
 8
Vanenburg Group B.V., In Re (289 ITR 464 AAR), Dana Corporation,
In Re (AAR No.788 of 2008), Amiantit International Holdings Ltd., In Re
NOTES (AAR No. 817 of 2009)
1
Sections 92 to 92F of the Indian Income Tax Act, 1961 (‘‘Act’’) and 9
Prop. reg. § 1.482-7(b)(3)(viii)(Example 2)
Rule 10A to 10E of the Income Tax Rules, 1962
2 10
Section 2(24) of the Act The Supreme Court ruling in the case of Azadi Bachao Andolan – 263
3
Section 2(24), read with section 2(47) of the Act ITR 706 (SC), has made it clear that so long as a transaction is not a
4
Section 2(14) of the Act sham or prohibited by law, the Revenue may not be permitted to ques-
5
Section 92B of the Act tion the commercial rationale for the taxpayer in transacting in any
6
Section 92F (v) of the Act particular manner.
7
CIT v. B. C. Srinivasa Setty, 128 ITR 294 (SC).

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