Section 173 - Definitions of certain terms relevant to determination of arm's length price, etc
Substance matters. Informal group arrangements, conduct and coordinated pricing can be transactions even without a conventional signed contract.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current law and effective date
Section 173 is controlled against the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026; earlier years and saved proceedings require the repeal-and-savings framework rather than automatic migration.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
Substance matters. Informal group arrangements, conduct and coordinated pricing can be transactions even without a conventional signed contract.
Who should use this section
Transfer-pricing users who need the statutory meanings of arm's length price, enterprise, permanent establishment, specified date and transaction.
Old-law bridge
section 92F
The old-law bridge is navigational, not automatic precedent transfer. Match the 1961 Act wording, saved proceedings, current 2025 Act text and effective date before importing an older interpretation.
Finance Act 2026 / current-law note
No section-specific Finance Act, 2026 textual substitution is separately flagged for section 173; the consolidated post-Finance-Act-2026 text remains the controlling version and must be used instead of pre-1 April 2026 extracts.
Professional alert
Application caution Use these definitions only in their statutory context and also check wider or narrower definitions elsewhere in the Act or treaty.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| Rule 77-85 | Definitions support the transfer-pricing Rules and reporting framework | 48 where reporting applies |
Worked application
A parent directs its Indian subsidiary to provide free engineering support to another group entity. The absence of an invoice does not prevent transaction analysis.
Evidence / compliance checklist
- written and oral arrangement records (section 173 evidence control 1).
- emails and group policies (section 173 evidence control 2).
- branch and PE structure (section 173 evidence control 3).
- service delivery evidence (section 173 evidence control 4).
Common mistake
A common section 173 error is to apply the old-law label or headline rate without rebuilding the current statutory conditions. For “Definitions for the transfer-pricing provisions”, the safer control is to test the exact taxpayer/transaction facts, the operative tax year, every linked Rule/Form and the Finance Act 2026 consolidated wording. Application caution Use these definitions only in their statutory context and also check wider or narrower definitions elsewhere in the Act or treaty.
Recommended approach
For section 173, start with the legal trigger in “Definitions for the transfer-pricing provisions”, document the evidence for that trigger, then run the computation or procedural step against the current text. As a cross-check, verify this provision-specific checkpoint: Substance matters. Informal group arrangements, conduct and coordinated pricing can be transactions even without a conventional signed contract.
Thresholds, periods and timing checkpoints
- Section 173 contains no standalone numeric checkpoint extracted for the register; apply its operative conditions from the current statutory text.
Related provisions and interaction map
Section 173 forms part of the sections 161-173 transfer-pricing code; apply Rules 77-124 only as relevant and cross-check sections 263, 286/296 plus treaty / PE provisions for this section.
Provision summary - verify verbatim text in the official Act
Text-status note: This guide does not reproduce the complete verbatim provision for section 173. Use the linked official consolidated Act before quoting sub-section language or preparing a filing, opinion or litigation document.
Primary-source trail
Statute: Income-tax Act, 2025 as amended by Finance Act, 2026
Rules: Income-tax Rules, 2026
Law navigation: Income Tax Department 2025 Act / Rules hub
Quoting note: Use the official consolidated Act for verbatim legislative language.
FAQs
Does an old Income-tax Act, 1961 case automatically decide section 173?
No. The old-law bridge helps research, but transferability depends on materially matching language, transition rules and any Finance Act 2026 change.
Which text should be quoted in advice or litigation?
Quote the consolidated official statute for the relevant tax year. If this page presents a provision summary rather than complete statutory text, use the official consolidated Act for verbatim legislative language.