(1) The arm's length price in international transactions shall be determined in accordance with the most appropriate method among the following methods based on the nature of flows, availability of reliable information, activities performed, resources employed, risks assumed or other factors prescribed by law, namely: -

a. comparable uncontrolled price method;

b. resale price method;

c. cost plus method;

d. profits split method;

e. transactional net margin method;

f.any other method where it can be demonstrated that-

(i)    none of the methods mentioned in clause (a) to (e) can be reasonably applied to determine the arm's length price for the   international transaction; and

(ii)  such other method yields a result consistent with the arm's length price.

 (2) Where the most appropriate method applied is a method other than the method referred to in clause (d) or clause (f) of sub-section (1) and the dataset of the arm's length price consists of six or more entries, an arm's length range beginning from the thirty percentile of the dataset and ending on the seventy percentiles of the dataset shall be constructed and the arm's length price shall be-

(a)   if the price at which the actual international transaction takes place is within the above range, the said price shall be treated as arm's length price;

(b)   if the price at which the actual international   transaction takes place is not within the above range, the median of the dataset should be taken   as the arm's length price;

(c)   in a case the dataset is less than six entries, the arm's length price shall be the arithmetical mean of all the values included in the dataset. 

(3) The most appropriate method mentioned in subsection (l) for determining the arm's length price shall be applicable in the manner prescribed by the rules: Provided that the total income received as a result of the arm's length price determined under this section for any international transaction shall not be less than the total income which would have been received if the price at which the international transaction was actually completed had been charged or paid.

(4) Where, in assessing any tax under section 10 of this Act, the Deputy Commissioner of Taxes is of the opinion that,

(a)   the value charged or paid by the taxpayer for international transactions is not determined in accordance with sub-sections (1) and (3); or

(b)   the taxpayer has failed to keep information documents or records in accordance with section 237; or

(c)   the information or data on which the arm's length price is determined by the taxpayer is not reliable or accurate; In that case the Deputy Commissioner of Taxes may determine the arm's length price of the international transaction in accordance with the provisions of sub-sections (1) and (3) on the basis of the information or documents or evidence available to him.

(5) In the case of determination of arm's length price under sub-section (4), the Deputy Commissioner of Taxes shall, on the basis of information or documents or evidence available to him, issue a notice to the effect that the arm's length price shall not be determined and give the taxpayer an opportunity to show cause within the date and time specified in the notice.

(6) Where an arm's length price is determined under this sub-section (4) and sub-section (4) of section 236, the Deputy Commissioner of Taxes shall, by order in writing, commence the calculation of the total income of the taxpayer by considering the arm's length price so determined.