Notification No. 83/2020 [F.No.500/1/2014-APA-II] / SO 3660(E)

Last updated: 20 October 2020

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This notification from the Ministry of Finance provides updated guidelines for determining the arm's length price for international and specified domestic transactions for the assessment year 2020-2021. It specifies acceptable percentage variations between the determined arm's length price and the actual transaction price. For wholesale trading, a variation of up to 1% is allowed, while for all other transactions, a variation of up to 3% is permitted. Transactions falling within these limits will have their actual price deemed as the arm's length price.

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION

New Delhi, the 19th October, 2020

[INCOME-TAX]

S.O. 3660 (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)(hereinafter 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 of the said Act 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 2020-2021.

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 per cent. or more of the total cost pertaining to such trading activities; and

(ii) (ii) average monthly closing inventory of such goods is ten per cent. or less of sales pertaining to such trading activities.

[Notification No. 83/2020/F. No. 500/1/2014-APA-II]

RUCHIKA SHARMA, Under Secy.

FAQ :

This notification sets out the acceptable variation limits for the arm's length price in international and specified domestic transactions for the assessment year 2020-2021.

For wholesale trading, the variation between the determined arm's length price and the actual transaction price must not exceed 1% of the latter.

For all other international or specified domestic transactions, the variation must not exceed 3% of the actual transaction price.

If the variation is within the specified limits (1% for wholesale trading, 3% for others), the actual transaction price will be considered the arm's length price.

Wholesale trading is defined as transactions where the purchase cost of finished goods is 80% or more of the total cost, and the average monthly closing inventory is 10% or less of sales.

Notification No : 83/2020
Source : https://www.incometaxindia.gov.in/communications/notification/notification_83_2020.pdf

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