CBDT’s Tolerance Limit for Transfer Pricing (92C ALP) for AY 2015-16 to 2018-19

Percentage Variation Allowed by CBDT between the Arm’s Length Price (ALP) determined under IT Sec.92C vis-a-vis the Actual Prices of International Transactions or Specified Domestic Transactions for Assessment Years 2015-16, 2016-17, 2017-18 and 2018-19

The CBDT has notified that where variation between ALP determined u/s 92C does not exceed 1% of the wholesale price (3% otherwise) of international or specified domestic transactions, then actual transaction price shall be taken as ALP for AY 2015-16, 2016-17, 2017-18 and 2018-19, i.e. the tolerance limits of price variation for transfer pricing purposes have been fixed by CBDT, as under:

CBDT Notification for AY 2017-18 and 2018-19

S.O. 1866(E).-In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961)(hereinafter referred to as the ‘Act’), read with proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm’s length price determined under section 92C of the Act and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one per cent. of the latter in respect of wholesale trading and three per cent. of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for assessment year 2017-18 and assessment year 2018-19.

Transfer Pricing Variation Limit AY 2017-18 and 2018-19: CBDT Notification No. 50 dt. 9 June 2017

CBDT Notification for AY 2016-17

In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961), read with proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm’s length price determined under section 92C and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one percent of the later in respect of wholesale trading and three percent of the later in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for Assessment Year 2016-2017.

CBDT Notification No. 57/2016 dt. 14 July 2016

CBDT Notification for AY 2015-16

In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961) read with proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm’s length price determined under section 92C and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one percent. of the latter in respect of wholesale trading and three percent. of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for Assessment Year 2015-2016.

CBDT Notification No. 86/2015 dt. 29 Oct. 2015

Further, it may be noted that all these Notifications by CBDT includes an Explanation, for the purpose of such Notifications, that “wholesale trading” means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:-

(i) purchase cost of finished goods is eighty per cent. or more of the total cost pertaining to such trading activities; and

(ii) average monthly closing inventory of such goods is ten per cent. or less of sales pertaining to such trading activities.

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