Arm's Length Price Definition (Section 92F)
Section 92F of the Income Tax Act defines the benchmark price used in transfer pricing regulations. The core idea is to determine the price that independent parties would agree upon under normal market conditions.
Understanding Uncontrolled Transactions
The Arm's length price represents the price in a hypothetical transaction between independent parties (i.e., unrelated persons) where neither party is subject to undue influence or control from the other (i.e., uncontrolled conditions).
Applying the Arm's Length Principle
This benchmark price is crucial for ensuring fair taxation, especially in international transactions involving associated enterprises. According to Section 92F, the price is considered an Arm's length price when:
- The parties involved are independent and unrelated persons.
- The transaction occurs under conditions that are not influenced or manipulated, meaning uncontrolled conditions.
Therefore, the definition accurately describes the standard against which related-party transactions are compared.
Important Questions from International Taxation
The main objective of safeguard duty is
- When tax system would be progressive?
Counter Vailing Duties (CVD) are often imposed on imports to offset the impact of
Given below are two statements one is labelled as Assertion (A) and the other is labelled as Reason (R).
Assertion (A): Section 91 provides for grant of unilateral relief in the case of resident taxpayers on income which has been taxed in India as well as in the country with which there is no Double Taxation Avoidance Agreement.
Reason (R): The relief under section 91 is granted by allowing to the tax payer a deduction from tax liability of an amount equal to the tax calculated at the average Indian rate of tax or the amount of tax calculated at the rate of tax of that other country on the doubly taxed income, whichever is higher.
In the light of the above statements, choose the most appropriate answer from the options given below:
Arm's length price as per section 92F is the price applied or proposed to be applied when:
