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TMI BlogComputation of income from international transaction having regard to arm's length price—Section 92 of the Income-tax Act—Reference to Transfer Pricing Officer and his role—RegardingX X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer, is required to determine arm's length price of an international transaction by an order and the Assessing Officer is required to compute the income having regard to the price so determined by the TPO. The notification regarding jurisdiction of TPOs and their controlling officers have been issued by the Central Board of Direct Taxes and the copies thereof are enclosed for ready reference as annexure II. In order to maintain uniformity of procedure and to ensure that work in this important area proceeds smoothly and effectively, the following guidelines are hereby issued : (i) Reference to Transfer Pricing Officer (TPO) : The power to determine arm's length price in an international transaction is contained in sub-section (3) of section 92C. However, section 92CA provides that where the Assessing Officer considers it necessary or expedient so to do, he may refer the computation of arm's length price in relation to an international transaction to the TPO. Sub-section (3) of section 92CA provides that the TPO after taking into account the material available with him shall, by an order in writing, determine the arm's length price in accordance with sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5 crores, the transactions should be referred to the TPO. Before making reference to the TPO, the Assessing Officer has to seek approval of the Commissioner/Director as contemplated under the Act. Under the provisions of section 92CA reference is in relation to the international transaction. Hence all transactions have to be explicitly mentioned in the letter of reference. Since the case will be selected for scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment. The threshold limit of Rs. 5 crores will be reviewed depending upon the workload of the TPOs. The work relating to selection of cases for scrutiny and reference to TPO on the above basis in respect of pending returns filed for the assessment year 2002-2003 should be completed by June 30, 2003. (ii) Role of Transfer Pricing Officer : The role of the TPO begins after a reference is received from the Assessing Officer. In terms of section 92CA this role is limited to the determination of arm's length price in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income will be made having regard to the arm's length price so determined by the TPO, it is imperative that a formal opportunity is given to the taxpayer before making adjustments to the total income. The opportunity with regard to the determination of arm's length price has already been given by the TPO and, therefore, opportunity by the Assessing Officer, for final determination of income under sub-section (4) of section 92C read with sub-section (4) of section 92CA is to be given by the Assessing Officer. (iv) Maintenance of data base : It is to be ensured by the DIT (Transfer Pricing) that the reference received from the Assessing Officer is dealt with expeditiously so as to leave the Assessing Officer with sufficient time to offer an opportunity of being heard to the taxpayer before computing the income and completing the assessment. In order to ensure that all the references are attended to timely and effectively, a record of all such developments should be maintained in the format enclosed as annexure I to these guidelines. This format will also serve as an important data base for future action and also help ensure uniformity in the determination of "arm's length pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... class of persons whose names begin with alphabet A to L and are assessed or asses- sable within the jurisdiction of Asses- sing Officer having their office in the territorial area indi cated in column 4. (ii) Joint Commissioner of Income-tax (Transfer Pricing Officer-II) Delhi Areas lying within the territorial lim its of States of Delhi, Rajasthan, Punjab, Haryana, Jammu and Kash mir, Uttar Pradesh, Uttaranchal, Himachal Pradesh Persons or class of persons whose names begin with alphabet M to Z and are assessed or asses- sable within the jurisdiction of Asses- sing Officer having their office in the territorial area indi cated in column 4. 2. (i) Joint Commissioner of Income-tax (Transfer of Pricing Officer-I) Mumbai Areas lying within the territorial limits of States of Mahar ashtra, Gujarat, and Madhya Pradesh, Daman and Diu Persons or class of persons whose names begin with alphabet A to L and are assessed or asses- sable within the jurisdiction of Asses- sing Officer having their office in the territorial area indi cated in column 4. (ii) Joint Commissioner of Income-tax (Transfer Pricing Officer-II) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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