Subscribe To Our Free Newsletter:

Amendment To Transfer Pricing Rules To Incorporate “Range Concept” and “Use Of Multi-Year Data”

The CBDT has issued a press release stating that the Rules for determining ALP have been amended to allow for introduction of a “range concept” for determination of ALP and “use of multiple year data” for undertaking comparability analysis in transfer pricing cases. The amended regime will be applicable for computation of ALP of international transactions and specified domestic transactions undertaken on or after 1/04/2014.


Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 20th October, 2015

Subject: Notification of Transfer Pricing Rules to incorporate “range concept” and “use of multi-year data” to reduce litigation on transfer pricing issues.

The Income-tax Act provides for determination of income having regard to Arm’s Length Price (ALP) in case of international transactions and specified domestic transactions. The provisions of the Income-tax Act were amended through the Finance (No.2) Act, 2014 to facilitate alignment of Indian transfer regime with international best practices.The manner of computation of ALP is laid down Income-tax Rules.

The Government has notified the amended Rules for determining ALP vide S.O. No. 2860 (E) dated 19/10/2015. The amended regime will be applicable for computation of ALP of international transactions and specified domestic transactions undertaken on or after 1/04/2014.

The amended rules allow for introduction of a “range concept” for determination of ALP and “use of multiple year data” for undertaking comparability analysis in transfer pricing cases. The use of range concept, being a statistical tool, enhances the reliability of analysis undertaken for computation of ALP. The range concept will be applicable in certain cases for determining the price and will begin with the 35th percentile and end with the 65th percentile of the comparable prices. Transaction price shown by the taxpayers falling within the range will be accepted and no adjustment will be made.The use of multiple year data allows for yearly variations to be averaged out and would therefore add value to transfer pricing analysis.

The amended rules would therefore provide clarity in determination of price in transfer pricing cases and reduce disputes on transfer pricing issues. It is a part of the Government’s continuing initiative of providing a stable and certain direct tax regime.
The Notification is available on the website of the Department incometaxindia.gov.in.

(Shefali Shah)
Pr. Commissioner of Income Tax (OSD)
Official Spokesperson, CBDT


Leave a Reply

Your email address will not be published. Required fields are marked *

*

Top

If you are a tax professional, you must sign up for our free newsletter. Why? Because we keep you informed about the latest developments in the world of tax. We focus only on the most important must-read judgements & articles that will impact your day-to-day professional work. You can see a chronological listing of all our postings on twitter & facebook


IMPORTANT: After signing up & clicking on the confirmation mail, send a test/ blank mail to editor@itatonline.info. Why? Because it is the easiest way to add our email address to your address/ contacts book and ensure that our Newsletter does not get sent to the Spam/ Junk folder


Email



Unsubscribe