The Central Board of Direct Taxes (CBDT) made amendments to the Indian transfer pricing rules (hereinafter referred to as the “amended rules”) by notification no 83/ 2015 dated 19 October 2015. The notification amends the Income-tax Rules, 1962 relating to use of multiple year data and arm’s length range while undertaking a transfer pricing analysis.
The amended rules allow for use of a “range concept” for determination of arm’s length price (ALP) and “use of multiple year data” for undertaking a transfer pricing comparability analysis. The range concept will be applicable in certain cases for determining the ALP 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 as arm’s length. Median of the range would be the ALP in case the transaction price is outside the range. The use of range concept, being a statistical tool, is expected to enhance the reliability of analysis undertaken for computation of ALP.