Income Tax Rules, 2002

From: 2023-11-01 - To: 0000-00-00 CHAPTER - VI TRANSFER PRICING 20. Application of this chapter.- This chapter applies for the purposes of section 108 mainly, which provide the Commissioner with the power to distribute, apportion or allocate income, expenditures or tax credits between associates in respect of transactions not made in accordance with the arm’s length principle. 21. Interpretation.- (1) In this Chapter,- (a) “comparable uncontrolled transaction”, in relation to a controlled transaction, means an uncontrolled transaction that satisfies one of the following conditions, namely:- (i) the differences (if any) between the two transactions or between persons undertaking the transactions do not materially affect the price in the open market, the resale price margin or the cost plus mark up, as the case may be; or (ii) if the differences referred to in sub-clause (i) do materially affect the price in the open market, the resale price margin or the cost plus mark up, as the case may be, then reasonably accurate adjustments can be made to eliminate the material effects of such differences; (b) “controlled transaction” means a transaction between associates; (c) “transaction” means any sale, assignment, lease, license, loan, contribution, right to use property or performance of services; (d) “uncontrolled persons” means persons who are not associates; and (e) “uncontrolled transaction” means a transaction between uncontrolled persons. (f) 22. Subject to the other rules in this Chapter, the Commissioner, in applying this Chapter shall also be guided by international standards, case law and guidelines issued by the various tax-related internationally recognized organizations. 23. Arm’s length standard.- (1) In determining the income of a person from a transaction with an associate, the standard to be applied by the Commissioner shall be that of a person dealing at arm’s length with a person who is not an associate (referred to as the “arm’s length standard”). (2) A controlled transactions shall meet the arm’s length standard if the result of the transaction is consistent with the result (referred to as the “arm’s length result”) that would have been realized…