As per the notification 45/2014 issued by the ministry of finance dated 23rd September 2014 the arm’s length price (determined under section 92 C of the Income Tax Act ) of an international transaction or a specefic domestic transaction will be same under the following situations for the assessment year 2014-15.
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· In case of wholesale trading:
If the variation between arm’s length price and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one percent of the latter.
· In all other cases:
If the variation between arm’s length price and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed three percent of the latter.
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Explanation. For the purposes of this notification, “wholesale trading” means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:-
(i) purchase cost of finished goods is eighty percent or more of the total cost pertaining to such trading activities; and
(ii) average monthly closing inventory of such goods is ten percent or less of sales pertaining to such trading activities.
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Source :- CBDT Related Tags Incometax, Transfer Pricing