Press release
India – New Rule Allows Use of ‘Other Method’ for Determining Arm’s Length Principle
According to the new rule 10AB to the Income-tax Rules, 1962, the other method for determination of the arm’s length price in relation to an international transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts.
The new transfer pricing rule allows tax payers more flexibility to calculate Arm’s Length Principle for routine as well as non-routine transactions such as reimbursements and collective transfers of tangible and intangible properties.
Rule 10 AB which leans toward a price based method (instead of profit based method) adds credibility to information related to commercial transactions, data on market conditions and other factors that affect the arm’s length price of a transaction.
Application of Transfer Pricing Rule 10AB:-
* During uncontrolled transactions involving investment banking, logistics
* While using tenders or price quotations to establish arm’s length principle during a loan/guarantee transaction
* When using the standard rate cards
The “other method” rule applies to Assessment Year 2012-13 and the subsequent years and is effective from April 1 2012.
Please call/email for more details.
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Nandita Verma
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