TP - CBDT allows range concept and multi year data for arriving at ALP
Applicable to international transactions and specified domestic transactions undertaken on or after April 1, 2014
Transaction price shown by taxpayers falling within the range will be accepted and no adjustment will be made.
Use of weighted average of PLI for 3 years.
The amended rules allow for introduction of a "range concept" for determination of ALP and "use of multiple year data" for undertaking comparability analysis in transfer pricing cases.
The use of range concept, being a statistical tool, enhances the reliability of analysis undertaken for computation of ALP.
The range concept will be applicable in certain cases for determining the price and will begin with the 35th percentile and end with the 65th percentile of the comparable prices.
Transaction price shown by the taxpayers falling within the range will be accepted and no adjustment will be made.
The use of multiple year data allows for yearly variations to be averaged out and would therefore add value to transfer pricing analysis.
The amended rules would therefore provide clarity in determination of price in transfer pricing cases and reduce disputes on transfer pricing issues