Transfer pricing adjustment confined to associated enterprise transactions, not the assessee's entire turnover under Chapter X.

Transfer pricing adjustment under Chapter X of the Income-tax Act, 1961 is confined to international transactions with associated enterprises on an arm's length price basis and cannot be extended to the assessee's dealings with independent third parties or entire turnover. The statutory scheme under Section 92 taxes only income arising from such covered international transactions, so any broader adjustment would exceed the legislative mandate and tax income outside Chapter X. The Bombay High Court followed earlier decisions on the same scheme and did not entertain the Revenue's challenge on this point.

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Issues: Whether the adjustment arising from determination of Arm's Length Price could be restricted to international transactions with associated enterprises and not extended to the assessee's entire turnover.

Analysis: Chapter X of the Income-tax Act, 1961 is a special provision dealing with computation of income from international transactions and specified domestic transactions having regard to Arm's Length Price. Section 92 brings to tax only income arising from international transactions with associated enterprises on an Arm's Length Price basis. The adjustment cannot be extended to transactions with independent third parties, as that would travel beyond the statutory mandate and could result in taxation of income not covered by Chapter X. The issue had already been answered against the Revenue in earlier decisions following the same statutory scheme.

Conclusion: The adjustment is confined to international transactions with associated enterprises. The Revenue's challenge on this question was not entertained.

Ratio Decidendi: Under Chapter X read with Section 92 of the Income-tax Act, 1961, transfer pricing adjustment is confined to international transactions with associated enterprises and cannot be applied to the assessee's entire turnover.

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