Section 164 Meaning of specified domestic transaction.
Income-tax Act, 2025
At a Glance
This document is Clause 164 of the Income Tax Bill, 2025 (Old Version), which defines "specified domestic transaction" for the Chapter on special provisions relating to avoidance of tax. It matters because it sets the threshold and the types of intra-country transactions that attract the Chapter's special rules; affected parties include taxpayers engaged in covered transactions and the tax administration. Effective date or decision date: Not stated in the document.
Background & Scope
Statutory hooks: Clause 164 operates as the definition provision within the Chapter titled "SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX" in the Income Tax Bill, 2025. The clause defines the term "specified domestic transaction" for the Chapter. The clause enumerates categories (a)-(f) of transactions that qualify, expressly excluding international transactions. The clause also imposes an aggregate threshold: the aggregate of such transactions entered into by the assessee in a tax year must exceed twenty crore rupees. The Bill text does not include further definitions or explanatory notes within the clause itself.
Statutory Provision Mode
Text & Scope
Coverage: Clause 164 defines "specified domestic transaction" in relation to an assessee and includes six categories:
- (a) any transaction referred to in section 122;
- (b) any transfer of goods or services referred to in section 140(9);
- (c) any business transacted between the assessee and other person as referred to in section 140(13);
- (d) any transaction referred to in any other section under Chapter VIII or section 144, to which provisions of section 140(9) or (13) are applicable;
- (e) any business transacted between the persons referred to in section 205(4);
- (f) any other transaction as prescribed.
Each item is conditional on the transaction not being an "international transaction" and on the aggregate of such transactions exceeding twenty crore rupees in a tax year.
Interpretation
Legislative intent and interpretive principles indicated by the text: The clause purposefully adopts an inclusive, enumerative approach by cross-referencing other sections (122, 140(9), 140(13), Chapter VIII, 144, 205(4)), signalling an intent to capture a range of domestic transactions that are relevant to avoidance-of-tax provisions. The inclusion of a financial threshold (Rs. 20 crore aggregate in a year) denotes a materiality filter: only taxpayers with significant transaction volumes will fall within the definition. The explicit exclusion of international transactions focuses the provision on domestic related-party or specified dealings. The clause relies on cross-references for content of certain categories; the Bill does not provide standalone substantive definitions for those cross-referenced items within Clause 164 itself.
Exceptions/Provisos
Carve-outs, thresholds, conditions:
- Exclusion: Transactions that are international transactions are excluded from the definition ("not being an international transaction").
- Threshold: Aggregate of such transactions must exceed Rs. 20 crore in a tax year to qualify as "specified domestic transaction".
- Prescriptive power: Clause (f) contemplates that other transactions may be prescribed to be included.
Other specific exceptions or provisos are Not stated in the document.
Illustrations
- Example 1: Not stated in the document (the clause does not provide an illustration of a transaction u/s 122 or 140(9)).
- Example 2: Not stated in the document (no numerical example showing aggregation to Rs. 20 crore).
Interplay
Interaction with Rules/Notifications/Circulars mentioned in the document: Not stated in the document. The clause depends on other sections (122, 140(9), 140(13), Chapter VIII, 144, 205(4)) for content and on subordinate legislation for clause (f) ("as prescribed"), but no specific rules, notifications or circulars are referenced in the Bill text.
- Textual placement and introductory formula: The Bill (Old Version) uses the opening phrase "In this Chapter, 'specified domestic transaction' in case of an assessee means...", whereas the enacted Section uses "For the purposes of this Chapter, the expression 'specified domestic transaction' in case of an assessee means.....".
- Practical impact: Largely stylistic; both formulations serve the same drafting function of defining the term for the Chapter. No substantive change in scope is indicated by this wording difference.
- Clause (d) - cross-references expanded: The Bill's clause (d) reads: "any transaction, referred to in any other section under Chapter VIII or section 144, to which provisions of section 140(9) or (13) are applicable;". The enacted Section 164 expands that to read: "any transaction, referred to in any other section under Chapter VIII or section 144, to which provisions of section 140(9) or (13) of this Act or section 80-IA(8) or (10) of the Income-tax Act, 1961 are applicable;".
- Practical impact:The enacted text explicitly adds cross-reference to section 80-IA(8) or (10) of the Income-tax Act, 1961 and clarifies that section 140(9) or (13) references are to provisions "of this Act". This appears to broaden or at least clarify the net of transactions captured by clause (d) by linking in provisions of the 1961 Act. Practically, taxpayers and advisers must consider the interplay with section 80-IA(8)/(10) of the 1961 Act when determining whether a transaction is a "specified domestic transaction". The textual precision reduces ambiguity about which statutory provisions are meant.
- Clause (f) - prescription language: The Bill uses "any other transaction as prescribed," whereas the enacted Section uses "any other transaction as may be prescribed,".
- Practical impact: Minor drafting variation; functionally similar. The enacted phrase "may be prescribed" is a conventional legislative formulation indicating delegated rule-making, but does not change the substantive delegation beyond what "as prescribed" already implied in the Bill.
- Other minor drafting and punctuation differences: The enacted provision adds the phrase "not being an international transaction" in parentheses with slightly different punctuation and inserts "of this Act" in clause (d).
- Practical impact:These are clarificatory drafting choices. The notable substantive addition is the explicit reference to section 80-IA(8) or (10) of the Income-tax Act, 1961; other differences do not materially alter the definition beyond clarifying statutory cross-links.
Practical Implications
- Compliance and risk areas: The clause makes the identification of a "specified domestic transaction" contingent on cross-referenced provisions. Practitioners will need to analyse the nature of transactions against sections 122, 140(9), 140(13), Chapter VIII and section 144 as well as section 205(4) to determine applicability. The materiality threshold (Rs. 20 crore) is a key compliance trigger; taxpayers with aggregate covered transactions above this limit will come within the Chapter's special provisions. The clause's reliance on prescribed categories (clause (f)) means additional transaction types may be added later, creating rule-making risk.
- Record-keeping/evidence points: Not stated in the document. However, by definitional design, taxpayers will need to maintain transaction records and aggregation calculations to demonstrate whether the Rs. 20 crore threshold is met or not. The Bill does not specify the nature or period of records to be retained.
Key Takeaways
- Clause 164 provides an enumerated definition of "specified domestic transaction" for the Chapter on avoidance of tax, excluding international transactions and subject to a Rs. 20 crore aggregate threshold per tax year.
- The definition operates primarily by cross-reference to other sections (122, 140(9), 140(13), Chapter VIII, 144, 205(4)), so the substantive scope depends on those provisions.
- Clause (f) permits the inclusion of additional transactions by prescription, allowing for delegated expansion of scope.
- The Bill text does not contain illustrative examples, compliance procedures, or transitional rules; those matters are Not stated in the document.
- Practical compliance focus: identify covered transaction types under the cross-referenced sections and monitor aggregate values annually to assess whether the Rs. 20 crore threshold is crossed.
- Absence of express interaction with any rules, circulars or administrative guidance in the clause leaves interpretive questions to be resolved by reading the cross-referenced provisions and any future subordinate legislation.
Full Text:
Section 164 Meaning of specified domestic transaction.
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