Transfer Pricing News

Important Notifications and Circulars issued during this quarter

Extension in applicability of Safe Harbour Rules to FY 2021-22

Central Board of Direct Taxes (‘CBDT’) via Notification no. 66/2022 has extended applicability of Safe Harbor Rules for assessment year 2022-23 i.e. financial year 2021-22 as well and will be effective from 1 April 2022. As per the said notification, safe harbour rates applicable for assessment year 2017-18 shall continue to apply for assessment year 2022-23.

Retention in tolerance range at 1 per cent for wholesale traders and 3 per cent for others for FY 2021-22

The Central Government via Notification no. 70/2022 extends applicability of tolerance range for financial year 2021-22 also and states that the variation between the arm’s length price determined under section 92C of the Income Tax Act, 1961 and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed 1 per cent in respect of wholesale trading and 3 per cent in all other cases of transaction price, the arm’s length criteria is deemed to be satisfied in such cases. Further for the purpose of this notification, definition of wholesale trading remains same as earlier and which is:

purchase cost of finished goods is 80 per cent or more of the total cost pertaining to such trading activities; and
average monthly closing inventory of such goods is 10 per cent or less of sales pertaining to such trading activities.