Section 92C of Income-Tax Act, 1961

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Section 92C of Income-Tax Act, 1961 deals with Transfer pricing - Computation of arm’s length price

Contents

From the Act

(1) The arm's length price in relation to an international transaction 5b[or specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe6, namely :—

(a) comparable uncontrolled price method;

(b) resale price method;

(c) cost plus method;

(d) profit split method;

(e) transactional net margin method;

(f) such other method as may be prescribed6a by the Board.

(2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm's length price, in the manner as may be prescribed7 :

8[Provided 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:

Provided further that if the variation between the arm's length price so determined and price at which the international transaction 8a[or specified domestic transaction] has actually been undertaken 8b[does not exceed 9[such percentage of the latter, as may be notified] by the Central Government in the Official Gazette in this behalf], the price at which the international transaction 8a[or specified domestic transaction] has actually been undertaken shall be deemed to be the arm's length price.]

9a[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.]

9b[(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.]

9c[(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.]

(3) Where during the course of any proceeding for the assessment of income, the Assessing Officer is, on the basis of material or information or document in his possession, of the opinion that—

(a) the price charged or paid in an international transaction 9d[or specified domestic transaction] has not been determined in accordance with sub-sections (1) and (2); or

(b) any information and document relating to an international transaction 9d[or specified domestic transaction] have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or

(c) the information or data used in computation of the arm's length price is not reliable or correct; or

(d) the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub-section (3) of section 92D,

the Assessing Officer may proceed to determine the arm's length price in relation to the said international transaction 9d[or specified domestic transaction] in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him:

Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the arm's length price should not be so determined on the basis of material or information or document in the possession of the Assessing Officer.

(4) Where an arm's length price is determined by the Assessing Officer under sub-section (3), the Assessing Officer may compute the total income of the assessee having regard to the arm's length price so determined :

Provided that no deduction under section 10A 10[or section 10AA] or section 10B or under Chapter VI-A 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 sub-section :

Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm's length price paid to another associated enterprise from which tax has been deducted 11[or was deductible] under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm's length price in the case of the first mentioned enterprise.

Recent Cases / Related Cases / Case Laws

  • May 2011: Mum. - ITAT: Transfer pricing - It is only the operating profit earned by comparable companies which can be considered for purpose of ALP adjustment
    • Items like interest income, rent receipts, dividend receipts, penalty collected, rent deposits returned back, foreign exchange fluctuations and profit on sale of assets do not form part of operational income of an international courier company - [2011] 11-40

Other related Sections from the Act

  • Section 2: Definitions. Includes meanings of various terms used in the Indian Income Tax Act, 1961
  • Section 92: Computation of income from international transaction having regard to arm's length price
  • Section 92A: Meaning of associated enterprise
  • Section 92B: Meaning of international transaction
  • Section 92BA: Meaning of specified domestic transaction
  • Section 92CA: Reference to Transfer Pricing Officer
  • Section 92CB: Power of Board to make safe harbour rules
  • Section 92D: Maintenance and keeping of information and document by persons entering into an international transaction
  • Section 92E: Report from an accountant to be furnished by persons entering into international transaction
  • Section 92F: Definitions of certain terms relevant to computation of arm?s length price, etc.

Sections of the Indian Income Tax Act, 1961


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