Computation of arm's length price
106. (1) The arm's length price in relation to an international transaction shall be determined by any of the prescribed methods, being the most appropriate method.
(2) The most appropriate method referred to in sub-section (1) shall be determined in the prescribed manner, having regard to the nature of transaction, class of associated enterprises, functions performed by such enterprises or such other relevant factors.
(3) The most appropriate method determined under sub-section (2) shall be applied, for determination of arm's length price, in the prescribed manner.
(4) The arm's length price shall be -
(a) the price determined by the most appropriate method, if only one price is determined by the method; or
(b) the arithmetical mean of the prices determined by the most appropriate method, if more than one price is determined by the method.
(5) The price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price if the variation between the arm's length price determined under sub-section (4) and the price at which the international transaction has actually been undertaken does not exceed five per cent of the later.
(6) The income of an associated enterprise shall not be recomputed by reason of determination of arm's length price in the case of the other associated enterprise.
(7) No deduction under sub-chapter-I of Chapter III shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this section.
(8) The determination of arm's length price shall be subject to safe harbour rules, as may be framed by the Board in this behalf.
