Computation of arm’s length price

According to the nature of the transaction, class of transactions, class of associated persons, functions performed by such persons, or any other relevant factors that the Board may specify, the arm's length price in regards to an international transaction will be determined by any of the following techniques, being the most appropriate method:-

(a) similar unregulated pricing technique;

(b) resale price approach;

(c) the cost-plus approach;

(d) the profit split strategy;

(e) the transactional net margin approach;

(f) any other approach that the Board may prescribe.

For the purpose of determining the arm's length price, the most appropriate approach mentioned in the aforementioned subsection shall be used in accordance with any applicable regulations. There is good piece of content on 80g benefits.

With the caveat that the arm's length price will be assumed to be the arithmetical mean of any prices that are derived using the most appropriate technique when there are multiple prices.

Furthermore, the price at which the global transaction has actually been conducted shall be deemed to be the arm's length price if the difference between the arm's length price so determined and price does not exceed the percentage that may be announced by the National Government in the Official Gazette in this regard. The first and second provisos are not applicable to an international transaction or a designated domestic transaction entered into on or after April 1, 2014, where more than one prices are set by the most appropriate method, and the arm's length price shall be determined in such manner as may be prescribed.

When the first proviso to the aforementioned sub-section, as it was before it was amended by the Finance (No. 2) Act, 2009 (33 of 2009), applied to an international transaction for an assessment year and the difference between the simple mathematical mean referred to in the said proviso as well as the price at which such transaction was actually undertaken exceeded 5% of the arithmetical mean, the taxpayer shall not be entitled to exercise the option as referenced.

Nothing in the aforementioned sub-section shall give the Assessing Officer the authority to assess or reassess under section 147, or to pass an order increasing the assessment, decreasing a refund already made, or otherwise increasing the assessee's liability under section 154 for any assessment year for which the proceedings have been concluded before the first day of October 2009.

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