Amendment of section 92C.
36. In section 92C of the Income-tax Act,—
(a) in sub-section (2),—
(i) in the second proviso, for the words “does not exceed such percentage of latter as may be notified”, the words “does not exceed such percentage not exceeding three per cent. of the latter, as may be notified” shall be substituted with effect from the 1st day of April, 2013;
(ii) after the second proviso, the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 2009, namely:—
“Explanation.—For the removal of doubts, it is hereby clarified that the provisions of the second proviso shall also be applicable to all assessment or reassessment proceedings pending before an Assessing Officer as on the 1st day of October, 2009.”;
(b) after sub-section (2), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2002, namely:—
“(2A) Where the first proviso to sub-section (2) as it stood before its amendment by the Finance (No. 2) Act, 2009, (33 of 2009), is applicable in respect of an international transaction for an assessment year and the variation between the arithmetical mean referred to in the said proviso and the price at which such transaction has actually been undertaken exceeds five per cent. of the arithmetical mean, then, the assessee shall not be entitled to exercise the option as referred to in the said proviso.”;
(c) after sub-section (2A) as so inserted, the following sub-section shall be inserted with effect from the 1st day of July, 2012, namely:—
“(2B) Nothing contained in sub-section (2A) shall empower the Assessing Officer either to assess or reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154 for any assessment year the proceedings of which have been completed before the 1st day of October, 2009.”.
Notes on Clauses:
Clause 36 of the Bill seeks to amend section 92C of the Income-tax Act relating to computation of arm’s length price.
The existing provisions of sub-section (2) of the aforesaid section 92C provide that where more than one price is determined by the most appropriate method, then, the arm’s length price shall be taken to be arithmetical mean of such price. Further, the second proviso to the said sub-section provides that if the variation between the arm’s length price as determined and price at which the international transaction has actually been undertaken does not exceed such percentage as may be notified by the Central Government in this behalf, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price.
The provisions contained in the first proviso to sub-section (2) of section 92C, as it stood before its amendment by the Finance (No. 2) Act, 2009 provides that where more than one price is determined by the most appropriate method, the arm’s length price shall be taken to be the arithmetical mean of such prices, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent. of such arithmetical mean.
The existing provisions of second proviso to sub-section (2) of the aforesaid section 92C provides that the variation between the arm’s length price so determined and price at which the international transaction has actually been undertaken does not exceed such percentage of latter as may be notified by the Central Government in the Official Gazette in this behalf, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price.
It is proposed to amend the aforesaid second proviso so as to confer power upon the Central Government to notify the limit of percentage as not exceeding three per cent. of the latter in case of the variation between the arm’s length price so determined and price at which the international transaction has actually been undertaken.
This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.
It is further proposed to insert an Explanation after the second proviso to sub-section (2) of the aforesaid section so as to clarify that the provisions of the second proviso shall also be applicable to any assessment or reassessment proceedings for computation of arm’s length price, if pending as on the 1st day of October, 2009 before an Assessing Officer.
This amendment will take effect retrospectively from 1st October, 2009.
It is also proposed to insert new sub-section (2A) to the aforesaid section so as to provide that where the first proviso to sub-section (2) as it stood before its amendment by the Finance (No. 2) Act, 2009, is applicable in respect of an international transaction for an assessment year and the variation between the arithmetical mean referred to in said proviso and the price at which such transaction has actually been undertaken exceeds five per cent. of the arithmetical mean, then, the assessee shall not be entitled to exercise the option as referred to in the said proviso.
These amendments will take effect retrospectively from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-2003 and subsequent assessment years.
It is also proposed to insert new sub-section (2B) to the aforesaid section so as to provide that nothing contained in sub-section (2A) shall empower the Assessing Officer either to assess or reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154 for any assessment year the proceedings of which have been completed before the 1st day of October, 2009.
This amendment will take effect from 1st July, 2012.
