Part 15: Prevention Of Tax Avoidance
Chapter I: General Provisions Relating To Prevention Of Tax Avoidance
Section 235 (Computation of arms lengths Price.)
clause 1: The arm's length price in relation to an international transaction shall be determined by applying the most appropriate method or methods selected from the following methods based on the nature of transaction, the availability of reliable information, functions performed, assets employed, risks assumed or such other factors as may be prescribed, namely: (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method; (f) any other method where it can be demonstrated that, (i) none of the methods mentioned in clause (a) to (e) can be reasonably applied to determine the arm's length price for the international transaction; and (ii) such other method yields a result consistent with the arm's length price.
clause 2: Where the most appropriate method applied is a method other than the method referred to in clause (d) or clause (f) of sub-section
clause 1: and the dataset of the arm's length price consists of 6 (six) or more entries, an arm's length range beginning from the 30 (thirty) percentile of the dataset and ending on the 70 (seventy) percentiles of the dataset shall be constructed and the arm's length price shall be(a) if the price at which the international transaction has actually been undertaken is within the range referred as above, then the price at which such international transaction has actually been undertaken shall be deemed to be the arm's length price; (b) if the price at which the international transaction has actually been undertaken is outside the arm's length range referred as mentioned above, the arm's length price shall be taken to be the median of the dataset; (c) in a case the dataset is less than six entries, the arm's length price shall be the arithmetical mean of all the values included in the dataset.
clause 3: the most appropriate method referred to in sub-section
clause 1: shall be applied for determination of arm's length price in the manner as may be prescribed: Provided that the arm's length price determined under this section shall not result in total income lower than the total income that would have been resulted if the price at which international transaction has actually been undertaken were taken as the price charged or paid in the said international transaction.
clause 4: Where in the course of any assessment under Part 10, the Deputy Commissioner of Taxes is of the opinion that (a) the price charged or paid in an international transaction has not been determined by the assessee in accordance with sub-sections
clause 1: and
clause 3: ; (b) the assessee has failed to maintain the information, documents or records in accordance with the provisions of section 237; or (c) the information or data based on which the arm's length price was computed by the assessee is not reliable or correct, in such case, the Deputy Commissioner of Taxes may determine the arm's length price in relation to the said international transaction in accordance with provisions of sub-sections
clause 1: and
clause 3: on the basis of information or documents or other evidence available to him.
clause 5: In determining the arm's length price under sub-section
clause 4: , the Deputy Commissioner of Taxes shall give an opportunity to the assessee by serving a notice calling upon him 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 information or documents or other evidence available to the Deputy Commissioner of Taxes.
clause 6: Where an arm's length price is determined under sub-section
clause 4: of this section or under sub-section
clause 4: of section 236, the Deputy Commissioner of Taxes shall by an order in writing, proceed to compute the total income of the assessee having regard to the arm's length price so determined.