Home India Ministry of Finance Variation between the arms length price determined under sec...
Date: 26-Jun-2023 Category: Extra Ordinary State: Union Government Country: India

Variation between the arms length price determined under section 92C of the said Act and the price at which the international transaction of specified domestic transaction has actually been undertaken does not exceed one per cent.

Issued by Ministry of Finance · Department of Revenue

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Executive Summary & Key Takeaways

What it means

  • The notification specifies the permissible tolerance range between the arm's length price and the actual transaction price for international and specified domestic transactions.
  • For Assessment Year 2023-2024, if the difference between the arm's length price (determined under Section 92C of the Income-tax Act, 1961) and the actual transaction price is within a specified percentage, the actual transaction price will be considered the arm's length price.
  • The tolerance range is 1% for wholesale trading and 3% for all other cases.

Key Changes

  • A tolerance range of 1% is allowed for wholesale trading transactions.
  • A tolerance range of 3% is allowed for all other international or specified domestic transactions.
  • This applies to Assessment Year 2023-2024.
  • Wholesale trading is defined as an international or specified domestic transaction of trading in goods where:
  • The purchase cost of finished goods is 80% or more of the total cost related to such trading activities.
  • The average monthly closing inventory of such goods is 10% or less of the sales related to such trading activities.

Impact Analysis

Taxpayers involved in International/Specified Domestic Transactions

  • Action Item: Ensure proper documentation to support the classification of transactions as 'wholesale trading' if claiming the 1% tolerance.

Tax Authorities

  • Impact: Increased scrutiny on transactions falling outside the tolerance range and on the classification of 'wholesale trading' transactions.

Auditors

  • Action Item: Assess the reasonableness of the classification of transactions as 'wholesale trading'.

Key Entities Referenced

Income-tax Act, 1961: The principal legislation governing income tax in India. Section 92C deals with arm's length price determination. Income-tax Rules, 1962: Rules framed under the Income-tax Act, 1961. Rule 10CA provides guidance on determining the arm's length price. Central Government: The issuer of this notification, acting through the Ministry of Finance (Department of Revenue).
Official Source Record View Original Source →
See Full Document Text
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99 सी.जी.-डी.एल.-अ.-26062023-246821 xxxGIDHxxx CG-DL-E-26062023-246821 xxxGIDExxx असाधारण EXTRAORDINARY भाग II—खण् ड 3—उप-खण्ड (ii) PART II—Section 3—Sub-section (ii) प्राजधकार स ेप्रकाजित PUBLISHED BY AUTHORITY स.ं 2657] नई दिल्ली, सोमिार, िनू 26, 2023/आर्ाढ़ 5, 1945 No. 2657] NEW DELHI, MONDAY, JUNE 26, 2023/ASHADHA 5, 1945 जित्त मत्रं ालय ) रािस्ट्ि जिभाग( अजधसचू ना नई दिल् ली, 26 िून, 2023 आय-कर का.आ. 2777)अ(.—केंद्रीय सरकार, आय-कर जनयम, 1962 के जनयम 10ग के उपजनयम )7( के परंतुक के साथ पठित आय-कर अजधजनयम, 1961 )1961 का 43( )जिसे इसमें इसके पश् चात् उक्त अजधजनयम कहा गया ह(ै की धारा 92ग की उपधारा )2( के तीसरे परंतुक द्वारा प्रित् त िजक्त यों का प्रयोग करत े हुए, यह अजधसूजचत करती ह ै दक िहां उक्त अजधजनयम की धारा 92ग के अधीन अिधाठरत आसज‍ नकट कीमत और िह कीमत, जिस पर अंतरााष्‍टर ीय संव् यिहार या जिजनर्िाष्‍ट ट िेिी संव् यिहार िास्ट्त जिक रूप स े दकया गया है, के बीच अंतर थोक व् यापार की बाबत बाि िाली कीमत के एक प्रजतित से अजधक नहीं ह ै और सभी अ‍ य मामलों में बाि िाली कीमत के तीन प्रजतित से अजधक नहीं ह,ै िहा ं िह कीमत, जिस पर अंतरााष्‍टर ीय संव् यिहार या जिजनर्िाष्‍ट ट िेिी संव् यिहार िास्ट् तजिक रूप स े दकया गया है, जनधाारण िर्ा 2023-2024 के जलए आसज‍ नकट कीमत समझी िाएगी । स्ट्प ष्‍टट ीकरण—इस अजधसूचना के प्रयोिनों के जलए, ‘‘थोक व् यापार’’ से ऐस े माल के व् यापार का ऐसा अतं रााष्‍टर ीय संव् यिहार या जिजनर्िाष्‍ट ट िेिी संव् यिहार अजभप्रेत ह,ै िो जनम्न जलजखत ितों को पूरा करता ह,ै अथाात् :-- )i( तैयार माल की क्रय लागत, ऐसे व् यापाठरक दक्रयाकलापों से संबंजधत कुल लागत का अस्ट्स ी प्रजतित या उसस े अजधक ह ै; और 4031 GI/2023 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)] )ii( ऐसे माल की औसत माजसक अंजतम सूची ऐस े व् यापाठरक दक्रयाकलापों से संबंजधत जिक्रयों का िस प्रजतित या उससे कम ह ै। [अजधसूचना स.ं 46/2023/एफ.सं. 500/1/2014- एपीए-II] डा. जिजित पटेल, अिर सजचि स्ट्प ष्‍टट ीकारक ज्ञापन यह अजधसूचना जनधाारण िर्ा 2023-24 के जलए थोक व् यापार के जलए एक प्रजतित और अ‍ य सभी मामलों में तीन प्रजतित की सह्यता रेंि का उपबंध करती ह ै । यह प्रमाजणत दकया िाता ह ै दक इस अजधसूचना को भूतलक्षी प्रभाि दिए िाने स े दकसी पर भी कोई प्रजतकूल प्रभाि नहीं पडगे ा । MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 26th June, 2023 INCOME-TAX S.O. 2777(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)(hereafter referred to as the said 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 said 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 2023-2024. Explanation.- For the purposes of this notification, “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. [Notification No. 46/2023/F. No. 500/1/2014-APA-II] Dr. VIJIT PATEL, Under Secy. Explanatory Memorandum The notification provides for tolerance range of one per cent. for wholesale trading and three per cent. in all other cases for assessment year 2023-2024. It is certified that none will be adversely affected by the retrospective effect being given to the notification. Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

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