Matching Fragments
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
ITA 6081/Mum/2018
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 from
the restrictions / conditions imposed under the statute. The Hon'ble
Jurisdictional High Court in CIT v/s Johnson & Johnson Ltd., ITA
no.1030/2014, dated 7th March 2017, while dealing with identical issue
of determination of arm's length price of royalty by resorting to
estimation by the Transfer Pricing Officer has held as under:-
