methods of computation of arms length price

Step 1: The Price at which the Property purchased or the Services obtained by the enterprise from an associated enterprise are sold to an unrelated enterprise is first determined. Step 2: Such Resale Price is reduced by the Normal Gross Profit Margin accruing to the Enterprise from the purchase and resale of Similar Goods in a comparable uncontrolled transaction. If there is no comparable uncontrolled transaction, then take the Gross Profit of an unrelated person from purchase and resale of Similar Goods Step 3: Then reduce the expenses incurred by the enterprise in connection with purchase of property. Step 4: The price so arrived is adjusted to account for the functional differences in the International Transaction & the Comparable uncontrolled Transaction which could materially affect the Gross Profit Margin in the Open

1. Resale Price Method 2. Cost Plus Method 3. Profit Split Method 4. Transactional Net Margin Method 5. Comparable Uncontrolled Price Method (CUP Method) Any other methods which is prescribed by the Board.

Comparable Uncontrolled Price Method (CUP Method) Resale Price Method Cost Plus Method Profit Split Method Transnational Net Margin Method Such Other Method as may be prescribed by the Board

Hiiii friend..... **Methods for Arms length Price are:** 1. Resale Price Method 2. Cost Plus Method 3. Profit Split Method 4. Transactional Net Margin Method 5. Comparable Uncontrolled Price Method (CUP Method) Any other methods which is prescribed by the Board. The explanation can be seen in Samkit answer. Thanks & Regards,

Dear Friend Method of computation of arms length Price -- Cost plus method -- Profit split method -- Transnational net margin method -- Resale price method -- Comparable Uncontrolled Price Method (CUP Method) -- Such Other Method as may be prescribed by the Board Thanks

**METHODS OF COMPUTATION OF ARMS LENGTH PRICE** Resale price method Cost plus method Profit split method Transactional net margin method Comparable uncontrolled price method Other prescribed method Thanks

> `methods of computation of arms length price` 1. Comparable Uncontrolled Price Method (CUP Method) 2. Resale Price Method 3. Cost Plus Method 4. Profit Split Method 5. Transnational Net Margin Method 6. Such Other Method as may be prescribed by the Board > `Computation of Arm’s Length Price under CUP Method` Step 1: Determine the price charged or paid for the property transferred or services provided in a comparable uncontrolled transaction Step 2: Such Price is then adjusted to account for the Functional Differences between the International Transaction & the Comparable Uncontrolled Transaction, which could materially affect the price in the open market. Step 3: Such Adjusted Price is the Arm’s Length Price > `Computation of Arm’s Length Price under Resale Price Method` Step 1: The Price at which the Property purchased or the Services obtained by the enterprise from an associated enterprise are sold to an unrelated enterprise is first determined. Step 2: Such Resale Price is reduced by the Normal Gross Profit Margin accruing to the Enterprise from the purchase and resale of Similar Goods in a comparable uncontrolled transaction. If there is no comparable uncontrolled transaction, then take the Gross Profit of an unrelated person from purchase and resale of Similar Goods Step 3: Then reduce the expenses incurred by the enterprise in connection with purchase of property. Step 4: The price so arrived is adjusted to account for the functional differences in the International Transaction & the Comparable uncontrolled Transaction which could materially affect the Gross Profit Margin in the Open Market. Step 5: The adjusted Price is the Arm’s Length Price > `Computation of Arm’s Length Price under Cost Plus Method` Step 1: Determine the Direct and Indirect Costs of Production in respect of Property transferred or Services provided to an associated enterprise Step 2: Determine the normal gross profit mark up to such costs which will arise from transfer of similar goods or services to an unrelated enterprise or in a comparable uncontrolled transaction Step 3: The normal gross profit mark up should be adjusted to account for the functional differences if any between the International Transaction and comparable uncontrolled transaction which could materially affect such profit mark­up in the open market Step 4: The cost referred in step 1 shall be increased by the adjusted profit mark up arrived Step 5: The sum so arrived is the arm’s length price > `Computation of Arm’s Length Price under Profit Split Method` This Method is applied in multiple International Transactions which are so inter­related that they cannot be evaluated separately. Step 1:­ Compute the Net Profit of the Associated Enterprise arising from the International Transaction. Step 2:­ Compute the Relative Contribution made by each of the associated enterprise to the earning of the combined Net Profit Step 3:­ Split the Combined Net Profit in proportion to their Contributions Step 4:­ The Sum so arrived at is the Arms Length Price > Computation of Arm’s Length Price under Transactional Net Margin > Method. Step 1: Compute the Net Margin realised by the Enterprise from an International Transaction entered into with an associated enterprise. Step 2: Compute the Net Profit Margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction. Step 3: Adjust the Net Profit Margin computed in Step 2 to account for differences Step 4: The Net Profit Margin computed in Step 1 is established to be the same as the net Profit Margin referred to in Step 3 Step 5: The net profit margin thus established is then taken into account to arrive at an arm’s length price in relation to the International Transaction