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Draft scheme of the proposed rules for computation of Arm’s Length Price (ALP) of an International Transaction or Specified Domestic Transaction undertaken on or after 01.04.2014

Income Tax - F. No. 134/11/2015-TPL - Dated:- 21-5-2015 - F. No. 134/11/2015-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes 21st May, 2015 Subject: - Draft scheme of the proposed rules for computation of Arm s Length Price (ALP) of an International Transaction or Specified Domestic Transaction undertaken on or after 01.04.2014. Section 92C of the Income Tax Act, 1961 (the Act ) provides for computation of Arm s Length Price (ALP) of an internation .....

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quent to the announcement, section 92C (2) of the Act was amended by the Finance (No. 2) Act, 2015 to provide that where more than one price is determined by application of the most appropriate method, the arm s length price in relation to an international transaction or specified domestic transaction undertaken on or after the 1st day of April, 2014 shall be computed in such manner as may be prescribed. 3. Therefore, the manner of computation of ALP is proposed to be provided through the amendm .....

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d to be selected as comparable entities of the tested party, based on the similarity of their functions, assets and risks (FAR) with that of the tested party; b) 3-year data of these 9 entities (or more) would be considered and the weighted average of such 3-year data of each company would be used to construct the data set. In certain circumstances, data of 2 out of 3 years could also be used. Thus, the data set or series would have a minimum of 9 data points; c) For calculating the weighted ave .....

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e transfer price is within the range no adjustment shall be made. There shall not be two different data sets - one for testing and one for making adjustments. B. Use of Multiple Year Data i. The multiple year data would be used only in case determination of ALP is by Transactional Net Margin Method (TNMM), Resale Price Method (RPM) or Cost Plus Method (CPM); ii. The multiple year data should comprise three years including the current year i.e. (year in which transaction has been undertaken) and .....

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