The case Pr. CIT vs. PMP Auto Components Pvt. Ltd. (Bombay High Court) revolves around the applicability of transfer pricing provisions under Chapter X of the Income Tax Act on the purchase of shares by an Indian company in its foreign subsidiary at a price exceeding the fair market value (FMV). The court ruled that such an investment is a capital transaction and does not generate taxable income, making transfer pricing adjustments inapplicable. The decision emphasized that Chapter X applies only when income arises from an international transaction, and in this case, the purchase of shares did not result in any taxable income.
