Transfer pricing fails where intra-India dealings lack a non-resident element and do not qualify as international transactions.

Transactions between the assessee, its Indian permanent establishment and joint ventures were held not to be international transactions under section 92B(2) because the dealings were between resident entities for Indian tax purposes and the business decisions and execution occurred in India. As the essential non-resident element required for transfer pricing provisions was absent, the transfer pricing adjustment could not be sustained. The earlier jurisdictional view on the same assessee and issue was followed, and the Revenue's challenge to deletion of the adjustment was rejected.

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Issues: Whether transactions between the assessee and its Indian permanent establishment and joint ventures constituted an international transaction under section 92B(2) so as to justify the transfer pricing adjustment.

Analysis: The dispute was identical to the assessee's own earlier year. The transactions were found to be between resident entities for Indian tax purposes, including the permanent establishment and the joint ventures, with the business decisions and execution taking place in India. On that basis, the essential condition for applying the transfer pricing provisions, namely a transaction between associated enterprises involving a non-resident element, was not satisfied. The prior jurisdictional decision was followed and the Revenue's challenge to the deletion of the adjustment was rejected.

Conclusion: The transactions did not constitute international transactions under section 92B(2), and the transfer pricing adjustment was unsustainable.

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