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The Central Government notifies the tolerance range for the difference between the arm's length price and the actual transaction price for Assessment Year 2021-2022. The price variation limit is one per cent for wholesale trading. The price variation limit is three per cent in all other cases. When the variation stays within these limits, the actual transaction price is deemed to be the arm's length price. Wholesale trading requires that the purchase cost of finished goods is eighty per cent or more of the total cost. Wholesale trading also requires that the average monthly closing inventory is ten per cent or less of sales.
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MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 29th October, 2021 (INCOME TAX)
S.O. 4586(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 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 2021-2022.
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:-
[Notification No. 124/2021/F. No. 500/1/2014-APA-II] NEHA NAUTIYAL, 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 2021-2022. It is certified that none will be adversely affected by the retrospective effect being given to the notification.
