To bring into operation the amended Sec. 92C (2) which was amended by the Finance (No. 2) Act, 2015the
CBDT brought out on 21st May 2015 a Draft Scheme for computation of ALP. The Draft Scheme has been
extensively analysed by the Professional Community. In this write up, among other things, we focus on the
following issues:
(i) Should the Proposed New Scheme be made mandatory for FY 2014-15, an year for which the Taxpayers
have already set their Transfer Prices under the old Rule?
(ii) Can an acceptable Arm’s Length Range be formed with less than 9 data-points of Comparable Entities?
(iii) Is it appropriate to compare Multiple Year Data of Comparable Entities with Single Year Data of Tested
Party?
(iv) Do we need to have two different data sets – one for comparison or testing, and the other for making TP
Adjustment?
Commodity transactions, both exports and imports, are quite common between Associated Enterprises (AEs). These transactions have one distinct feature: the prices are quoted in public on reputed Commodity
Exchanges (e.g. London Metal Exchange, Chicago Board of Trade, Multi Commodity Exchange of India, Malaysian Palm Oil Board,etc.) and published by reputed Price Reporting Agencies (PRAs – like World Oil, Argus, Platts, Bloomberg, etc). Data of independent third party transactions, therefore, is available in plenty in the form of price-quotes, on exchanges and in reports of PRAs.
To bring into operation the amended Sec. 92C (2) which was amended by the Finance (No. 2) Act, 2015 the CBDT brought out on 21st May 2015 a Draft Scheme for computation of ALP. The Draft Scheme has been extensively analysed by the Professional Community. In this write up, among other things, we focus on the following issues:
(i) Should the Proposed New Scheme be made mandatory for FY 2014-15, an year for which the Taxpayers have already set their Transfer Prices under the old Rule?
(ii) Can an acceptable Arm’s Length Range be formed with less than 9 data-points of Comparable Entities?
(iii) Is it appropriate to compare Multiple Year Data of Comparable Entities with Single Year Data of Tested Party?
(iv) Do we need to have two different data sets – one for comparison or testing, and the other for making TP Adjustment?