Section 92C Computation of arm’s length price

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The Tax Publishers 92C. Computation of arms length price. (1) The arms length price in relation to an [1][international transaction or specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method[2], having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely : (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method; (f) such other method as may be prescribed[3] by the Board. (2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arms length price, in the manner as may be prescribed[4] : [5][Provided that where more than one price is determined by the most appropriate method, the arms length price shall be taken to be the arithmetical mean of such prices : Provided further that if the variation between the arms length price so determined and price at which the [6][international transaction or specified domestic transaction] has actually been undertaken [7][does not exceed such percentage not exceeding three per cent. of the latter, as may be notified] by the Central Government in the Official Gazette in this behalf], the price at which the [8][international transaction or specified domestic transaction] has actually been undertaken shall be deemed to be the arms length price.] [9][Provided also that where more than one price is determined by the most appropriate method, the arms length price in relation to an international transaction or specified domestic transaction undertaken on or after the 1st day of April, 2014, shall be computed in such manner as may be prescribed[10] and accordingly the first and second proviso shall not apply.] [11][Explanation.For the removal of doubts, it is hereby clarified that the provisions of the second proviso shall also be applicable to all assessment or reassessment proceedings pending before an Assessing Officer as on the 1st day of October, 2009.] [12][(2A) Where the first proviso to sub-section (2) as it stood before its amendment by the Finance (No. 2) Act, 2009 (33 of 2009), is applicable in respect of an [13][international transaction or specified domestic transaction] for an assessment year and the variation between the arithmetical mean referred to in the said proviso and the price at which such transaction has actually been undertaken exceeds five per cent. of the arithmetical mean, then, the assessee shall not be entitled to exercise the option as referred to in the said proviso.] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

92C. Computation of arms length price.

(1) The arms length price in relation to an [1][international transaction or specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method[2], having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely :

(a) comparable uncontrolled price method;

(b) resale price method;

(d) profit split method;

(e) transactional net margin method;

(f) such other method as may be prescribed[3] by the Board.

(2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arms length price, in the manner as may be prescribed[4] :

[5][Provided that where more than one price is determined by the most appropriate method, the arms length price shall be taken to be the arithmetical mean of such prices :

Provided further that if the variation between the arms length price so determined and price at which the [6][international transaction or specified domestic transaction] has actually been undertaken [7][does not exceed such percentage not exceeding three per cent. of the latter, as may be notified] by the Central Government in the Official Gazette in this behalf], the price at which the [8][international transaction or specified domestic transaction] has actually been undertaken shall be deemed to be the arms length price.]

[9][Provided also that where more than one price is determined by the most appropriate method, the arms length price in relation to an international transaction or specified domestic transaction undertaken on or after the 1st day of April, 2014, shall be computed in such manner as may be prescribed[10] and accordingly the first and second proviso shall not apply.]

[11][Explanation.For the removal of doubts, it is hereby clarified that the provisions of the second proviso shall also be applicable to all assessment or reassessment proceedings pending before an Assessing Officer as on the 1st day of October, 2009.]

[12][(2A) Where the first proviso to sub-section (2) as it stood before its amendment by the Finance (No. 2) Act, 2009 (33 of 2009), is applicable in respect of an [13][international transaction or specified domestic transaction] for an assessment year and the variation between the arithmetical mean referred to in the said proviso and the price at which such transaction has actually been undertaken exceeds five per cent. of the arithmetical mean, then, the assessee shall not be entitled to exercise the option as referred to in the said proviso.]