Section 92BA of ITA, 1961 : Section 92Ba: Meaning Of Specified Domestic Transaction

Explanation using Example

Imagine a scenario where a company, 'X Pvt Ltd', is engaged in the business of manufacturing and is eligible for a deduction under Section 80-IA of the Income-tax Act, 1961. This company sells goods to another entity, 'Y Ltd', which is a related party as per the Act's definitions. The total value of goods sold to Y Ltd during the financial year is ₹25 crore.

Since the transaction value exceeds ₹20 crore, it qualifies as a 'specified domestic transaction' under Section 92BA of the Income-tax Act. Therefore, X Pvt Ltd is required to ensure that the transaction with Y Ltd is conducted at arm's length, meaning that the price and terms of the sale are similar to what would have been charged to an unrelated party. X Pvt Ltd must also maintain specified documentation and comply with the transfer pricing regulations to substantiate the arm's length nature of the transactions.