![]() Iii) The price so arrived at is further reduced by the expenses incurred by the enterprise in connection with the purchase of the property or obtaining the services. Ii) Such resale price is reduced by the amount of normal gross profit margin accruing to the enterprise or to an unrelated enterprise from the purchase and resale of the same or similar property or from obtaining and providing the same or similar services in a comparable uncontrolled transaction, or a number of such transactions I) The price at which property purchased or services obtained by the enterprise from an associated enterprise are resold or are provided to an unrelated enterprise, is identified. This is a comparison of prices charged for the property transferred or service provided in a controlled transaction to a price charged for property or services transferred in a comparable uncontrolled transaction. Note: CUP is applied when price is charged for a product or service. Iii) The adjusted price arrived at under ii) is taken to be Arm’s Length Price in respect of the property transferred or services provided in international transaction. Ii) Such price is adjusted to account for differences, if any, between the International transaction and comparable uncontrolled controlled transactions or between the parties entering into such transactions, which could materially affect the price in the open market. I) Determined the price charged or paid for the property transferred or services provided in a comparable uncontrolled transaction. Comparable Uncontrolled Price Method(CUP) Note: Where an assessee has entered into various types of international transactions basis with associated enterprises, arm’s length price should be determined on a transaction by transaction basis not on an aggregate basis- Development Consultants (P.) Ltd. Such other methods as may be prescribed by the board. Methods of Computation of Arm’s Length Price Section 92CĪrm’s Length Price can be computed by the following methods Ħ. ![]() Note: if certain policies of government restrict free play and free movement of transactions in the market then the Arm’s Length Price will be computed after considering these conditions and restrictions. Section 5 provides “ that non residents is liable to tax in respect of income which is received or deemed to be received in India by him or on his behalf or which accrue or arises or deemed to accrue or arises in India during previous year. ![]() Section 9 provides for income which is deemed to accrue or arise in India. Note: Section 92 is not applicable to a Non-resident whose income is not taxable as per provisions sections 5 and 9 of the Income Tax Act, 1961. Income includes losses and it will be net of expenses as decide in case of UOI v. If an international transaction includes only outgoings such as expenses, interest, allowances or other then these are also decided or valued on the basis of Arm’s Length Price. The transaction should be in uncontrolled conditions. A transaction will be between two unrelated or persons andģ. The price should be applied or proposed to be applied in a transaction.Ģ. ![]() Methods of Computation of Arm’s Length Price Section 92C.Main ingredients of Arm’s Length Price.Uncontrolled Conditions are that conditions which are not controlled or suppressed or moulded for achievement of a predetermined results. Unrelated Persons Section 92A, the persons said to be unrelated if they are not associated or deemed to be associated enterprise. Under Income Tax Act, 1961 Section 92F define Arm’s Length Price is the price applied (or proposed to be applied) when two unrelated persons enter into a transaction in uncontrolled conditions. Under Companies Act, 2013 define Arm’s Length Transactions for the purpose of Section 188(1), the expression Arm’s Length Transaction means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party. A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. ![]()
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