As per section 92 of the Income Tax Act,1961 “Any
income arising from an international transaction shall
be computed having regard to the arm's length
price” Where in an international transaction two or
more associated enterprises enter into a mutual
agreement or arrangement for the allocation or
apportionment of, or any contribution to, any cost or
expense incurred or to be incurred in connection with
a benefit, service or facility provided or to be
provided to any one or more of such enterprises, the
cost or expense allocated or apportioned to, or, as
the case may be, contributed by, any such enterprise
shall be determined having regard to the arm's
length price of such benefit, service or facility, as the
case may be.
OBJECTIVE
OECD Inclusive Framework released a public consultation document on matters where its members seek input from stakeholders in conducting this 2020 review. This webinar shall touch upon the issues relating to implementation, scope and content of CbC Reporting set out in the document for public consultation.
OBJECTIVE
“Gig Economy” refers to digital platforms that allow independent freelancers to connect with individuals or businesses for short-term services or asset-sharing. The growth of sharing and gig economy can lead to greater transparency and minimise compliance burdens for both tax administrations and taxpayers. This webinar shall deal with the model rules for reporting by the Platform Operators set out by the OECD.
Objectives & Agenda :
To know the background of Abu Dhabi Global Market (ADGM) and the kinds of business that can be set-up in ADGM. To understand the procedure for setting-up business in ADGM and the benefits of operating from ADGM. To analyse the restrictions placed on persons operating in ADGM. To know the rules governing ADGM and finally the webinar will cover the compliances that has to be done while carrying out operations in ADGM
Oecd's recommendation to address tax challenges of digital economyDVSResearchFoundatio
OBJECTIVE
On 31 January 2020, the Organisation for Economic Co-operation and Development (OECD) released a Statement by the Inclusive Framework on BEPS on the Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalization of the Economy. The webinar shall discuss the architecture of Pillar One which deals with the new taxing right, as a basis for negotiation of a consensus-based solution and additionally, the progress on discussions for Pillar Two, which deals with ensuring minimum level of taxation
Budget 2016 was recently announced by the Finance Minister of India. This Presentation unravels the Transfer Pricing and International Tax proposals of the Budget 2016.
National Economic Survey - Volume I - Chapter 9 Privatization And Wealth Crea...DVSResearchFoundatio
OBJECTIVE
National Economic Survey (NES) is the flagship annual document of the Ministry of Finance of the Government of India. It reviews the developments in the Indian economy over the past financial year, summarizes the performance on major development programs, and highlights initiatives of the government and the prospects of the economy in the short to medium term.
OBJECTIVE
OECD Inclusive Framework released a public consultation document on matters where its members seek input from stakeholders in conducting this 2020 review. This webinar shall touch upon the issues relating to implementation, scope and content of CbC Reporting set out in the document for public consultation.
OBJECTIVE
“Gig Economy” refers to digital platforms that allow independent freelancers to connect with individuals or businesses for short-term services or asset-sharing. The growth of sharing and gig economy can lead to greater transparency and minimise compliance burdens for both tax administrations and taxpayers. This webinar shall deal with the model rules for reporting by the Platform Operators set out by the OECD.
Objectives & Agenda :
To know the background of Abu Dhabi Global Market (ADGM) and the kinds of business that can be set-up in ADGM. To understand the procedure for setting-up business in ADGM and the benefits of operating from ADGM. To analyse the restrictions placed on persons operating in ADGM. To know the rules governing ADGM and finally the webinar will cover the compliances that has to be done while carrying out operations in ADGM
Oecd's recommendation to address tax challenges of digital economyDVSResearchFoundatio
OBJECTIVE
On 31 January 2020, the Organisation for Economic Co-operation and Development (OECD) released a Statement by the Inclusive Framework on BEPS on the Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalization of the Economy. The webinar shall discuss the architecture of Pillar One which deals with the new taxing right, as a basis for negotiation of a consensus-based solution and additionally, the progress on discussions for Pillar Two, which deals with ensuring minimum level of taxation
Budget 2016 was recently announced by the Finance Minister of India. This Presentation unravels the Transfer Pricing and International Tax proposals of the Budget 2016.
National Economic Survey - Volume I - Chapter 9 Privatization And Wealth Crea...DVSResearchFoundatio
OBJECTIVE
National Economic Survey (NES) is the flagship annual document of the Ministry of Finance of the Government of India. It reviews the developments in the Indian economy over the past financial year, summarizes the performance on major development programs, and highlights initiatives of the government and the prospects of the economy in the short to medium term.
ALLOWABILITY OF OUTSTANDING INTEREST CONVERTED INTO DEBENTURES AS AN EXPENSE ...DVSResearchFoundatio
Key Takeaways:
- Facts and issues of the case
- Rationale behind the section
- Ruling of lower jurisdiction authorities
- Rival submissions before the Honourable Supreme Court
- Observations and final rulings of Honourable Supreme Court
- Way Forward
Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill...DVSResearchFoundatio
Key Takeaways:
- Rationale for the Bill
- Non-applicability of Few Provisions
- Tax Incentives for Alternative Investment Fund
- Rationalisation of Provisions for Foreign Institutional Investors
- Miscellaneous Amendments
Key Takeaways
Analysis of definitions in Income tax act and treaties
Taxability under the act and treaties
IRoyalty vs. Business income
Illustrative Cases
Judicial Precedents
Income Computation and Disclosure Standards (ICDS) – VI to XDVSResearchFoundatio
Objectives & Agenda :
To understand the concept of ICDS and the rationale for introducing ICDS, its applicability and its commencement year. To analyse ICDS VI-X and draw up a comparative analysis of ICDS and Accounting Standards (AS). Finally, to know the relevant disclosure of ICDS in tax audit report.
Impact of taxation on cross border investment Isha Joshi
Consequent to the implemented economic liberalisation in India during the 1990s, substantial international investment activity began within the Indian capital markets and through corporate vehicles with an increasingly vibrant fervour. In fact, today, Foreign Institutional Investors (FIIs) play a crucial role in the liquidity, growth and vitality seen in Indian capital markets. Simultaneously, along with increasing FII activity, as a result of the favourable economic and political climate, India also witnessed an increasing quantum of Foreign Domestic Investment (FDI).
The regulation of these investment channels and instruments was at the front and centre of economic policy debate, a part of which revolves around taxation. There is undoubtedly a proximate and intelligible nexus between taxation and the employment of these investment tools. A taxation regime that is favourable can work in effectively attracting more international investment which in turn would enhance market liquidity, activity, and growth.1 While FIIs and FDIs may appear to be similar investment channels, for the most part, they serve entirely different objectives, and operate in substantially different manners and are subject to different regulatory regimes in terms of exchange, economic and taxation policy.
In the coming sections of this paper, the authors have attempted to analyse several aspects of FII and FDI taxation in India. The first section delineates the differences in FIIs and FDIs, their market strategy, modus operandi, and objectives, while ascertaining what exactly these investment channels imply and the various investment vehicles that may be employed by foreign actors.
The subsequent section of the paper outlines the tax regime applicable to such FDIs and FIIs, depending on the organisational scheme and objective of the business vehicle so employed for the investment.
Given that FIIs and FDIs essentially involve a foreign element, the question of double taxation is one which necessarily requires to be addressed. To that end, in the third section of this paper, the authors have looked at Double Taxation Avoidance Agreements (DTAAs) (Tax Treaties) in the context of FIIs and FDIs.
Objectives & Agenda :
To know the need and relevanve of income tax, its applicability and its commencement date. To understand the meaning of the term "income" and "tax" and additionally the relevant terms in relation to income and taxes. The webinar shall predominantly focus on the basic and fundamental provisions of Income Tax Act, 1961, which is required to further appreciate the subsequent charging and computational provisions.
Key Takeaways:
- Facts of the case
- Issues and Orders
- Contention of the parties
- Observations of Honourable Supreme Court
- Conclusion and way forward
The Multilateral Instrument (MLI) is the latest development in International taxation which would modify the existing bilateral treaties (DTAAs) and implement measures to prevent Base Erosion Profit Shifting (BEPS) strategies. In this Webinar we shall analyse the provisions of Part III of the MLI relating to 'Treaty Abuse'. Articles 6 to 11 are covered under this Part and provide important concepts like Principle Purpose Test (PPT), Limitation on Benefits (LOB) and anti-abuse measures addressing 'Triangular PE' and other treaty-related measures.
ALLOWABILITY OF OUTSTANDING INTEREST CONVERTED INTO DEBENTURES AS AN EXPENSE ...DVSResearchFoundatio
Key Takeaways:
- Facts and issues of the case
- Rationale behind the section
- Ruling of lower jurisdiction authorities
- Rival submissions before the Honourable Supreme Court
- Observations and final rulings of Honourable Supreme Court
- Way Forward
Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill...DVSResearchFoundatio
Key Takeaways:
- Rationale for the Bill
- Non-applicability of Few Provisions
- Tax Incentives for Alternative Investment Fund
- Rationalisation of Provisions for Foreign Institutional Investors
- Miscellaneous Amendments
Key Takeaways
Analysis of definitions in Income tax act and treaties
Taxability under the act and treaties
IRoyalty vs. Business income
Illustrative Cases
Judicial Precedents
Income Computation and Disclosure Standards (ICDS) – VI to XDVSResearchFoundatio
Objectives & Agenda :
To understand the concept of ICDS and the rationale for introducing ICDS, its applicability and its commencement year. To analyse ICDS VI-X and draw up a comparative analysis of ICDS and Accounting Standards (AS). Finally, to know the relevant disclosure of ICDS in tax audit report.
Impact of taxation on cross border investment Isha Joshi
Consequent to the implemented economic liberalisation in India during the 1990s, substantial international investment activity began within the Indian capital markets and through corporate vehicles with an increasingly vibrant fervour. In fact, today, Foreign Institutional Investors (FIIs) play a crucial role in the liquidity, growth and vitality seen in Indian capital markets. Simultaneously, along with increasing FII activity, as a result of the favourable economic and political climate, India also witnessed an increasing quantum of Foreign Domestic Investment (FDI).
The regulation of these investment channels and instruments was at the front and centre of economic policy debate, a part of which revolves around taxation. There is undoubtedly a proximate and intelligible nexus between taxation and the employment of these investment tools. A taxation regime that is favourable can work in effectively attracting more international investment which in turn would enhance market liquidity, activity, and growth.1 While FIIs and FDIs may appear to be similar investment channels, for the most part, they serve entirely different objectives, and operate in substantially different manners and are subject to different regulatory regimes in terms of exchange, economic and taxation policy.
In the coming sections of this paper, the authors have attempted to analyse several aspects of FII and FDI taxation in India. The first section delineates the differences in FIIs and FDIs, their market strategy, modus operandi, and objectives, while ascertaining what exactly these investment channels imply and the various investment vehicles that may be employed by foreign actors.
The subsequent section of the paper outlines the tax regime applicable to such FDIs and FIIs, depending on the organisational scheme and objective of the business vehicle so employed for the investment.
Given that FIIs and FDIs essentially involve a foreign element, the question of double taxation is one which necessarily requires to be addressed. To that end, in the third section of this paper, the authors have looked at Double Taxation Avoidance Agreements (DTAAs) (Tax Treaties) in the context of FIIs and FDIs.
Objectives & Agenda :
To know the need and relevanve of income tax, its applicability and its commencement date. To understand the meaning of the term "income" and "tax" and additionally the relevant terms in relation to income and taxes. The webinar shall predominantly focus on the basic and fundamental provisions of Income Tax Act, 1961, which is required to further appreciate the subsequent charging and computational provisions.
Key Takeaways:
- Facts of the case
- Issues and Orders
- Contention of the parties
- Observations of Honourable Supreme Court
- Conclusion and way forward
The Multilateral Instrument (MLI) is the latest development in International taxation which would modify the existing bilateral treaties (DTAAs) and implement measures to prevent Base Erosion Profit Shifting (BEPS) strategies. In this Webinar we shall analyse the provisions of Part III of the MLI relating to 'Treaty Abuse'. Articles 6 to 11 are covered under this Part and provide important concepts like Principle Purpose Test (PPT), Limitation on Benefits (LOB) and anti-abuse measures addressing 'Triangular PE' and other treaty-related measures.
Revenue Recognition In IFRS By Yash BatraYash Batra
Detailed Presentation on revenue recognition as per IFRS. Accounting on revenue recognition is critical especially when World has defined path to follow IFRS accounting and reporting of its financial. I have tried to capture all critical aspects of revenue recognition in this presentation.
Overview of Transfer Pricing in India - EY IndiaSadanandGahivare
Read about transfer pricing in India & its applicability which can help you build and implement the structure that makes sense for your business & to manage the cost of trade.
A complete presentation on Transfer Pricing study, report and procedural aspect 92D. India has signed the historic multilateral convention with 65 countries on BEPS. Safe Harbour Rules u/s 92CB now revised
This document is a guide to a Three-tiered Transfer Pricing Documentation with a special focus on the implementation of Country-by-Country reporting in Transfer Pricing as well as issues and considerations of Developing Countries.
Disclaimer
Please note that this paper was originally prepared for presentation at a
technical discussion, sources quoted have appropriately being referenced, and
opinion expressed herein by the author does not necessarily in anyway
represent the Opinion of OECD or the Federal Inland Revenue Service (FIRS). The
write up is strictly for information purpose, I therefore make no representation as
to the accuracy and completeness of the information contained in this
publication. I accept no liability for any loss that may arise from the use of this
paper.
Long Term Visa (LTV) is granted to the following categories of persons of Bangladesh, Afghanistan and Pakistan coming to India on valid travel documents i.e. valid passport and valid visa, and seeking permanent settlement in India with a view to acquire Indian citizenship:-
i. Members of minority communities in Bangladesh/ Afghanistan/ Pakistan, namely Hindus, Sikhs, Buddhists, Jains, Parsis and Christians.
ii. Bangladesh/ Pakistan women married to Indian nationals and staying in India; or Afghanistan nationals married to Indian nationals in India and staying in India.
iii. Indian origin women holding Bangladesh/ Afghanistan/ Pakistan nationality married to Bangladesh/ Afghanistan/ Pakistan nationals and returning to India due to widowhood/ divorce and having no male members to support them in Bangladesh/ Afghanistan/ Pakistan.
iv. Cases involving extreme compassion.
Non-resident Indians are a section of people whose roots belong to India and who have migrated from India. The Indian Government is aware of the importance of Indian Diaspora in the form of NRIs/PIOs which is spread all across the world and which despite being away from India is making significant contribution to the Indian economy on a global platform and to the economic, financial and social benefits which have been brought to India; therefore, it attempts to provide benefits to them to attract their investments. They are also called for taking part in the economy. The Indian government gives lot of benefits to NRI not only with respect to ease of making investment in India but also in Taxation. The investment from NRIs is easy money available and provides the much needed leverage to the economy. The Indian Diaspora today constitutes an important, and inimitable, part of the Indian economy. The PPT discusses about he various account that can be opened by NRIs in India
In a move to further rationalize and liberalise the overseas investment central Government and Reserve Bank of India notified Foreign Exchange Management (Overseas Investment) Rules, 2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022 respectively on 22 Aug 2022.
The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics. Immense clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment related transactions that were earlier under approval route are now under automatic route, significantly enhancing "Ease of Doing Business".
The 2008 Financial Crisis changed the world of Banking. Many malpractices by the Banks and various financial institutions came into light and the regulators started scrutinizing and penalizing them. The world’s most important number “LIBOR” came under the sword of the Regulators. In this article we will explore the origins and the fall of the once revered LIBOR rate.
THERE ARE QUITE A FEW REGULATORY SPACES
WHICH NEEDS TO BE KEPT IN CONSIDERATION
WHILE MAKING THE REPORT. IN THIS ARTICLE WE
SHALL DISCUSS REGARDING DRAFTING AND THE
CONTENT OF VALUATION REPORT ONE BY ONE IN
DETAIL.
One of the important aspect of Start up is raising of funds. Fundraising is a necessary, and most important task in the life of Start ups. IN THIS ARTICLE GIVES PRELIMINARY INSIGHTS INTO FUND RAISING BY STARTUPS
How to Obtain Permanent Residency in the NetherlandsBridgeWest.eu
You can rely on our assistance if you are ready to apply for permanent residency. Find out more at: https://immigration-netherlands.com/obtain-a-permanent-residence-permit-in-the-netherlands/.
A "File Trademark" is a legal term referring to the registration of a unique symbol, logo, or name used to identify and distinguish products or services. This process provides legal protection, granting exclusive rights to the trademark owner, and helps prevent unauthorized use by competitors.
Visit Now: https://www.tumblr.com/trademark-quick/751620857551634432/ensure-legal-protection-file-your-trademark-with?source=share
In 2020, the Ministry of Home Affairs established a committee led by Prof. (Dr.) Ranbir Singh, former Vice Chancellor of National Law University (NLU), Delhi. This committee was tasked with reviewing the three codes of criminal law. The primary objective of the committee was to propose comprehensive reforms to the country’s criminal laws in a manner that is both principled and effective.
The committee’s focus was on ensuring the safety and security of individuals, communities, and the nation as a whole. Throughout its deliberations, the committee aimed to uphold constitutional values such as justice, dignity, and the intrinsic value of each individual. Their goal was to recommend amendments to the criminal laws that align with these values and priorities.
Subsequently, in February, the committee successfully submitted its recommendations regarding amendments to the criminal law. These recommendations are intended to serve as a foundation for enhancing the current legal framework, promoting safety and security, and upholding the constitutional principles of justice, dignity, and the inherent worth of every individual.
NATURE, ORIGIN AND DEVELOPMENT OF INTERNATIONAL LAW.pptxanvithaav
These slides helps the student of international law to understand what is the nature of international law? and how international law was originated and developed?.
The slides was well structured along with the highlighted points for better understanding .
Military Commissions details LtCol Thomas Jasper as Detailed Defense CounselThomas (Tom) Jasper
Military Commissions Trial Judiciary, Guantanamo Bay, Cuba. Notice of the Chief Defense Counsel's detailing of LtCol Thomas F. Jasper, Jr. USMC, as Detailed Defense Counsel for Abd Al Hadi Al-Iraqi on 6 August 2014 in the case of United States v. Hadi al Iraqi (10026)
1. Page | 3
Oct 2021 newsletter Issue-7, Volume-1
IN THIS ARTICLE WE WILL DISCUSS PRICING OF
INTERNATIONAL TRANSACTION IN ACCORDANCE
WITH INCOME TAX, 1961.
Pricing in International
Transactions with Associated
Enterprises
About the Author
CA Sudha G Bhushan
FCA,FCS, RV & IP (IBBI),
INDEPENDENT WOMEN
DIRECTOR (REGD. WITH
MCA)
E-mail-sudha@taxpertpro.com
Mobile - +91 9769033172
Sudha G. Bhushan is a renowned Finance
Professional and is a Co-Founder of Taxpert
Professionals, a multifaceted consulting company.
She is advisor to Bank of Baroda, NRI and
international operations and Empanelled with HDFC
Bank
1. Introduction
As per section 92 of the Income Tax Act,1961 “Any
income arising from an international transaction shall
be computed having regard to the arm's length
price” Where in an international transaction two or
more associated enterprises enter into a mutual
agreement or arrangement for the allocation or
apportionment of, or any contribution to, any cost or
expense incurred or to be incurred in connection with
a benefit, service or facility provided or to be
provided to any one or more of such enterprises, the
cost or expense allocated or apportioned to, or, as
the case may be, contributed by, any such enterprise
shall be determined having regard to the arm's
length price of such benefit, service or facility, as the
case may be.
The Section 92C of the Act requires that the arm's
length price in relation to an international transaction
shall be determined by any of the following methods,
being the most appropriate method, 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 by the
Board.
2 Methods
2.1 Comparable uncontrolled price method
(i)the price charged or paid for property transferred
or services provided in a comparable uncontrolled
transaction, or a number of such transactions, is
identified;
(ii) such price is adjusted to account for differences,
if any, between the international transaction and the
comparable uncontrolled transactions or between
the enterprises entering into such transactions,
which could materially affect the price in the open
market;
(iii) the adjusted price arrived at under sub-clause
(ii) is taken to be an arm's length price in respect of
the property transferred or services provided in the
international transaction;
2.2 Resale price method
(i)the price at which property purchased or services
obtained by the enterprise from an associated
enterprise is resold or are provided to an unrelated
enterprise, is identified;
(ii)such resale price is reduced by the amount of a
normal gross profit margin accruing to the
Methods
comparable
uncontrolled
price
method;
resale price
method;
cost plus
method;
profit split
method;
transactional
net margin
method;
such other
method as
may be
prescribed by
the Board.
2. Page | 4
Oct 2021 newsletter Issue-7, Volume-1
Enterprise or to an unrelated enterprise from the
purchase and resale of the same or similar property
or from obtaining and providing the same or similar
services, in a comparable uncontrolled transaction,
or a number of such transactions;
(iii) the price so arrived at is further reduced by the
expenses incurred by the enterprise in connection
with the purchase of property or obtaining of
services;
(iv) the price so arrived at is adjusted to take into
account the functional and other differences,
including differences in accounting practices, if any,
between the international transaction and the
comparable uncontrolled transactions, or between
the enterprises entering into such transactions,
which could materially affect the amount of gross
profit margin in the open market;
(v)the adjusted price arrived at under sub-clause (iv)
is taken to be an arm's length price in respect of the
purchase of the property or obtaining of the services
by the enterprise from the associated enterprise;
2.3 Cost plus method
(i) the direct and indirect costs of production incurred
by the enterprise in respect of property transferred
or services provided to an associated enterprise, are
determined;
(ii) the amount of a normal gross profit mark-up to
such costs (computed according to the same
accounting norms) arising from the transfer or
provision of the same or similar property or services
by the enterprise, or by an unrelated enterprise, in a
comparable uncontrolled transaction, or a number of
such transactions, is determined;
(iii)the normal gross profit mark-up referred to in
sub-clause (ii) is adjusted to take into account the
functional and other differences, if any, between the
international transaction and the comparable
uncontrolled transactions, or between the
enterprises entering into such transactions, which
could materially affect such profit mark-up in the
open market
(iv)the costs referred to in sub-clause (i) are
increased by the adjusted profit mark-up arrived at
under sub-clause (iii);
(v) the sum so arrived at is taken to be an arm's
length price in relation to the supply of the property
or provision of services by the enterprise;
2.4 Profit split method
It may be applicable mainly in international
transactions involving transfer of unique intangibles
or in multiple international transactions which are so
interrelated that they cannot be evaluated
separately for the purpose of determining the arm's
length price of any one transaction, by which-
(i)the combined net profit of the associated
enterprises arising from the international
transaction in which they are engaged, is
determined;
(ii) the relative contribution made by each of the
associated enterprises to the earning of such
combined net profit, is then evaluated on the basis
of the functions performed, assets employed or to
be employed and risks assumed by each enterprise
and on the basis of reliable external market data
which indicates how such contribution would be
evaluated by unrelated enterprises performing
comparable functions in similar circumstances;
(iii) the combined net profit is then split amongst
the enterprises in proportion to their relative
contributions, as evaluated under sub-clause (ii);
(iv) the profit thus apportioned to the assessee is
taken into account to arrive at an arm's length price
in relation to the international transaction:
Provided that the combined net profit referred to in
sub-clause (i) may, in the first instance, be partially
allocated to each enterprise so as to provide it with
a basic return appropriate for the type of
international transaction in which it is engaged, with
reference to market returns achieved for similar
types of transactions by independent enterprises,
and thereafter, the residual net profit remaining
after such allocation may be split amongst the
enterprises in proportion to their relative
contribution in the manner specified under sub-
clauses (ii) and (iii), and in such a case the
aggregate of the net profit allocated to the
enterprise in the first instance together with the
residual net profit apportioned to that enterprise on
the basis of its relative contribution shall be taken
to be the net profit arising to that enterprise from
the international transaction.
2.5 Transactional net margin method
(i)the net profit margin realized by the enterprise
from an international transaction [or a specified
domestic transaction] entered into with an
associated enterprise is computed in relation to
costs incurred or sales effected or assets employed
or to be employed by the enterprise or having
regard to any other relevant base;
(ii) the net profit margin realised by the enterprise
or by an unrelated enterprise from a comparable
uncontrolled transaction or a number of such
transactions is computed having regard to the same
base;
3. Page | 5
Oct 2021 newsletter Issue-7, Volume-1
(iii) the net profit margin referred to in sub-clause
(ii) arising in comparable uncontrolled transactions is
adjusted to take into account the differences, if any,
between the international transaction and the
comparable uncontrolled transactions, or between
the enterprises entering into such transactions,
which could materially affect the amount of net profit
margin in the open market;
(iv) the net profit margin realised by the enterprise
and referred to in sub-clause (i) is established to be
the same as the net profit margin referred to in sub-
clause (iii);
(v)the net profit margin thus established is then
taken into account to arrive at an arm's length price
in relation to the international transaction.
Any other method
It is any method which takes into account the price
which has been charged or paid, or would have been
charged or paid, for the same or similar uncontrolled
transaction, with or between non-associated
enterprises, under similar circumstances,
considering all the relevant facts.
3.Flexibility in determination of Arm’s Length
Price
Transfer Pricing provisions allows flexibility in
determination of Arm’s Length Price. It permits use
of arithmetic mean/ range (i.e. 35th percentile to
65th percentile).
The Range concept is applicable for all the
transactions including international transactions with
effect from Apr 2014. The range concept is used for
all the methods except the Profit Split Method (PSM)
and the “other method”
There should be a minimum of 6 comparable for
applicability of Range concept. If the number of
comparable less than 6 then arithmetic concepts is
applicable. The arm’s length range is defined as
35th percentile and the 65th percentile of the
dataset arranged in the ascending order.
Rule 10CA of the Income Tax Rules prescribes the
determination of ALP in range concept. The Arm’s
length range will constitute of the values falling
between 35th and the 65th percentile of the
comparable entries that are arranged in the
ascending order.
35th
Percentile = Total no. Of Entries * 35/100 (Lowest
value in the dataset)
65th
Percentile = Total no. Of Entries * 65/100
(Highest value)
If the price as calculated in the 35th Percentile is a
whole number, then the 35th percentile shall be the
arithmetic mean of such value and the value
immediately succeeding in the dataset.
If the value derived from the formula is not a whole
number, then the comparable entry in the next data
place should be considered as the 35th percentile.
The same has to be followed for the 65th percentile
and the 50th percentile (Median).
If the price at which an international transaction or
specified domestic transaction has actually been
undertaken is within the range, the price at which
the international or specified domestic transaction is
undertaken, it is deemed to be the arm’s length
price as per section 92C (1).
The price at which an international transaction or
the specified domestic transaction has actually been
undertaken is outside the arm’s length range
referred in sub-rule (4) of the rule 10 CA, the arm’s
length price shall be taken to be the median of the
dataset.
Conclusion
It is upto the company which method to choose as
far as it is the most appropriate method. As per Rule
10C of Income Tax Rules, 1961, most appropriate
method shall be the method which is best suited to
the facts and circumstances of each particular
international transaction and which provides the
most reliable measure of an arm's length price in
relation to the international transaction.
In selecting the most appropriate method, the
following factors shall be taken into account like the
nature and class of the international transaction, the
class or classes of associated enterprises entering
into the transaction and the functions performed by
them taking into account assets employed or to be
employed and risks assumed by such enterprises,
the availability, coverage and reliability of data
necessary for application of the method, the degree
of comparability existing between the international
transaction and the uncontrolled transaction and
between the enterprises entering into such
transactions, the extent to which reliable and
accurate adjustments can be made to account for
differences, if any, between the international
transaction and the comparable uncontrolled
transaction or between the enterprises entering into
such transactions, the nature, extent and reliability
of assumptions required to be made in application
of a method.