Section 92C of ITA, 1961 : Section 92C: Computation Of Arms Length Price

ITA, 1961

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Explanation using Example

Imagine a company in India, TechSolutions Pvt Ltd, which has a subsidiary in Singapore, TechSolutions SG. They engage in an international transaction where TechSolutions SG provides specialized software services to TechSolutions Pvt Ltd for $100,000. The Indian tax authorities suspect that this price is not reflective of the market rate and may have been set to shift profits to the Singapore subsidiary, where tax rates are lower.

The Income Tax Officer (ITO) decides to apply Section 92C of the Income-tax Act, 1961 to determine the arm's length price of the transaction. The ITO considers various methods such as the Comparable Uncontrolled Price (CUP) method, Resale Price Method (RPM), and others to find the most appropriate method for this transaction. A...

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