CBDT Notification on Determination of Arm's Length Price for AY 2016-17 u/s 92C (Transfer Pricing)
The CBDT has notified that where variation between ALP determined u/s 92C does not exceed 1% of the wholesale price (3% otherwise) of international or specified domestic transactions, then actual transaction price shall be taken as ALP for AY 2016-17, i.e. tolerance limits of price variation for transfer pricing purposes, as under:
CBDT Notification No. 57/2016 dt. 14 July 2016
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 later in respect of wholesale trading and three percent of the later 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.
For the purposes of this notification, "wholesale trading" means an international transaction or specified domestic transaction of trading in goods, which fulfills 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.