In section 92C of the Income-tax Act, in sub-section (2), for the proviso, the following provisos shall be substituted with effect from the 1st day of October, 2009, namely:—
"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 has actually been undertaken does not exceed five per cent. of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price.".
Clause 40 of the Bill seeks to amend section 92C of the Income-tax Act which relates to computation of arm’s length price.
Under the existing provisions contained in sub-section (2) of the said section, the most appropriate method shall be applied for determination of arm’s length price in the manner prescribed. The proviso to the said sub-section (2) provides that where the most appropriate method results in more than one price, the arithmetical mean of such or, at the option of the assessee, a price which differs from the arithmetical mean by an amount not exceeding five per cent. of such mean may be taken to be the arm’s length price in relation to the international transaction.
It is proposed to substitute the existing proviso so as to provide 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. It is further provided that the variation between the arm’s length price so determined and price at which the international transaction has actually been undertaken does not exceed five per cent. of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price.
This amendment will take effect from 1st October, 2009.
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