Sections 92 to 92F contained in Chapter X of the
Income Tax Act, 1961 titled “Special Provisions Relating to Avoidance of Tax”
were introduced by the Finance Act, 2001 w.e.f. 1.4.2002 with a view to provide
an exhaustive legislative framework relating to the fair computation of income
arising from international transactions between associated enterprises (“AEs”)
having regard to the arms length price (“ALP”) [Central Board of Direct
Taxes, Circular No. 14/2001, 2001 252 ITR 65]. Before this amendment in
2002, cross border transactions were regulated under section 92 of the Income
Tax Act, 1961 (“the Act”). However, the said section was limited in its scope
and application and also employed undefined terms viz. ‘close connection’,
‘adjustment of profits’ and ‘estimation of reasonable profits’ etc.
