Income Tax - Draft scheme of the proposed rules for computation of Arm's Length Price (ALP)

By Vijay Kumar

Section 92C of the Income Tax Act, 1961 provides for computation of Arm's Length Price (ALP) of an international transaction or specified domestic transaction. The Finance Minister in his Budget speech, while introducing the Finance (No. 2) Bill 2014, had made an announcement that "range concept" for determination of ALP would be introduced in the Indian transfer pricing regime however, the arithmetic mean concept will continue to apply where the number of comparables is inadequate. Further, it was announced that use of multiple year data would be permitted for undertaking comparability analysis. Consequent to the announcement, section 92C (2) of the Act was amended by the Finance (No. 2) Act, 2015 to provide that where more than one price is determined by application of the most appropriate method, the arm's 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.

The manner of computation of ALP is proposed to be provided through the amendment of Income-tax Rules. The CBDT has published a Draft Scheme for comments and suggestions from stakeholders.

CBDT F. No. 134/11/2015-TPL., Dated: May 21, 2015

TODAY evening, Justice MB Shah, former Judge of the Supreme Court will release a book on Black Money, Tax Havens & Policy Response written by our Managing Editor Shailendra Kumar, in the presence of top experts in the field including former Supreme Court Judge, Justice Arijit Pasayat, the Azadi Bachao Andolan icon Shiva Kant Jha and former CBDT Member S S Khan.