Transfer Pricing – Notified tolerance limit under third proviso to section 92C(2) [AY 2015-16]

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE – NOTIFIED TOLERANCE LIMIT UNDER THIRD PROVISO TO SUB-SECTION (2) OF SECTION 92C

NOTIFICATION NO.86/2015 [F.NO.500/1/2014-APA-II]/SO 2942(E), DATED 29-10-2015

In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961) read with proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm’s length price determined under section 92C and the price of which the international transaction or specified domestic transaction has actuality been undertaken does not exceed, one percent, of the latter In respect of wholesale trading and three percent, of the latter In all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for Assessment Year 2015-2016.

Explanation.—For the purposes of this notification, “wholesale trading” means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:—

(i)

purchase cost of finished goods is eighty per cent or more of the total cost pertaining to such trading activities; and

(ii)

average monthly closing inventory of such goods is ten per cent or less of sales pertaining to such trading activities.

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