CBDT’s Tolerance Limit for Transfer Pricing (92C ALP) for AY 2020-21

CBDT notifies the price variation tolerance limits for ALP determination under transfer pricing, in respect of AY 2020-21, i.e. where variation between Arm’s Length Price (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, as under:

CBDT Income Tax Notification 83/2020 dt. 19/10/2020: Transfer Pricing Variation Limit AY 2020-21

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 later in respect of wholesale trading and three per cent 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 2020-21.

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

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

It may be noted that in past CBDT has notified such price variation tolerance limits for ALP determination under transfer pricing, as under:

AY 2019-20:

CBDT Income Tax Notification 64/2019 dt. 13/09/2019

AY 2017-18 and 2018-19:

CBDT Income Tax Notification 50/2017 dt. 09/06/2017

AY 2016-17:

CBDT Income Tax Notification 57/2016 dt. 14/07/2016

AY 2015-16:

CBDT Income Tax Notification 86/2015 dt. 29/10/2015

One Response

  1. Sahil Bansal

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