Matching Fragments
price of an international transaction by applying the most
appropriate method having regard to the nature of
transaction for class of transaction or functions performed,
etc. The most appropriate method prescribed are as
under:-
i) Comparable Uncontrolled Price Method;
ii) Resale Price Method;
iii) Cost Plus Method;
iv) Profit Split Method;
v) Transactional Net Margin Method; and
vi) Such other methods, as may be prescribed by the Board.
12. Rule 10B of Income Tax Rules, 1962 (for short "the
Rules"), provides the mechanism for determination of arm's
length price under the aforesaid methods prescribed under
section 92C of the Act. If the Assessing Officer in course of
assessment proceedings finds that the assessee has entered
into international transactions with its AE, he may with the
previous approval of the authority concerned make a
reference to the Transfer Pricing Officer under section
92CA(1) of the Act to compute the arm's length price of the
international transaction by applying any of the methods
prescribed under section 92C of the Act. After receiving
such a reference from the Assessing Officer, the Transfer
Pricing Officer is required to determine the arm's length
price of the international transaction as per the provisions
contained under section 92C and 92CA of the Act read with
relevant rules. Thus, as could be seen from the reading of
the aforesaid provisions, the duty of the Transfer Pricing
Officer is restricted only to the determination of arm's
length price of an international transaction between two
related parties by applying any of the methods prescribed
under section 92C of the Act r/w rule 10B of the Rules.
Thus, there is no provision under the Act empowering the
Transfer Pricing Officer to determine the arm's length price
on estimation basis, that too, by entertaining doubts with
regard to the business expediency of the payment and in
the process stepping into the shoes of the Assessing Officer
for making disallowance under section 37(1) of the Act.
This, in our considered opinion, is not in conformity with the
statutory provision, hence, unacceptable. The Transfer
Pricing Officer is duty bound to determine the arm's length
price of the international transaction by adopting one of the
method prescribed under the statute and cannot deviate
Firmenich Aromatics India P. Ltd.
