Arm`s Length Price Introduction of Multi Year ALP Determination Approach by Finance Bill, 2025

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The Tax Publishers Finance Bill, 2025--Arm's Length Price Introduction of Multi Year ALP Determination Approach by Finance Bill, 2025 CA. Nisha Bhandari Determination of arm's length price (ALP) in transfer pricing provisions is very critical and depends upon various factors. In order to make the procedure simplify, the Finance Bill, 2025 has introduced the concept of transfer pricing assessment in a block. The learned author analyses the amendments proposed by the Finance Bill, 2025 impacting transfer pricing provisions. 1. Background Transfer pricing provisions enable computation of income arising from an international transaction or a specified domestic transaction with regard to an arm's length price. These provisions are contained in sections 92 to 92F. Section 92CA provides the procedure governing reference of an international transaction or a specified domestic transaction to the Transfer Pricing Officer (TPO), for computation of their arm's length price (ALP). Section 92C provides for computation of arm's length price in relation to an international transaction or a specified domestic transaction. The determination of ALP in transfer pricing provisions inter alia proceeds in the following manner -- -- the assessing officer may, refer the computation of the ALP with the previous approval of the Principal Commissioner or Commissioner, in relation to an international transaction or a specified domestic transaction entered in any previous year, to the TPO; -- the TPO determine the ALP in relation to the said transaction in accordance with sub-section (3) of section 92C and sends a copy of his order to the assessing officer and to the assessee; -- the assessing officer shall proceed to compute the total income of the assessee for such previous year under sub-section (4) of section 92C in conformity with the ALP as so determined by the TPO. 2. Concept of transfer pricing assessment in a block, introduced SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Finance Bill, 2025--Arm's Length Price

Introduction of Multi Year ALP Determination Approach by Finance Bill, 2025

CA. Nisha Bhandari

Determination of arm's length price (ALP) in transfer pricing provisions is very critical and depends upon various factors. In order to make the procedure simplify, the Finance Bill, 2025 has introduced the concept of transfer pricing assessment in a block. The learned author analyses the amendments proposed by the Finance Bill, 2025 impacting transfer pricing provisions.

1. Background

Transfer pricing provisions enable computation of income arising from an international transaction or a specified domestic transaction with regard to an arm's length price. These provisions are contained in sections 92 to 92F.

Section 92CA provides the procedure governing reference of an international transaction or a specified domestic transaction to the Transfer Pricing Officer (TPO), for computation of their arm's length price (ALP). Section 92C provides for computation of arm's length price in relation to an international transaction or a specified domestic transaction.

The determination of ALP in transfer pricing provisions inter alia proceeds in the following manner --

-- the assessing officer may, refer the computation of the ALP with the previous approval of the Principal Commissioner or Commissioner, in relation to an international transaction or a specified domestic transaction entered in any previous year, to the TPO;

-- the TPO determine the ALP in relation to the said transaction in accordance with sub-section (3) of section 92C and sends a copy of his order to the assessing officer and to the assessee;

-- the assessing officer shall proceed to compute the total income of the assessee for such previous year under sub-section (4) of section 92C in conformity with the ALP as so determined by the TPO.

2. Concept of transfer pricing assessment in a block, introduced