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The Central Government notifies arm's length price variation tolerances for international transactions and specified domestic transactions for Assessment Year 2016-2017. The transaction price is deemed to be the arm's length price if the variation does not exceed one percent for wholesale trading and three percent for all other cases. Wholesale trading requires a finished goods purchase cost of eighty percent or more of the total trading cost. Wholesale trading also requires an average monthly closing inventory of ten percent or less of trading sales.
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शोभन कर, िनदशक MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 14th July, 2016 [INCOME TAX] S. O. 2425(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), 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 percent.of the latter in respect of wholesale trading and three percent.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 2016-2017.
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 percent. or more of the total cost pertaining to such trading activities; and
(ii) average monthly closing inventory of such goods is ten percent. or less of sales pertaining to such trading activities.
[Notification No. 57/2016/F. No. 500/1/2014-APA-II] SOBHAN KAR, Director
