The Central Board for Direct Taxes ("CBDT"), the apex body of direct taxes in India, have notified vide notification no. 57/2016/F.No.500/1/2014-APA-II dated 14th July 2015, the tolerance range for the difference in the arm's length price as computed under section 92C of the Income Tax Act, 1961 and the prices at which the international transaction and/or specified domestic transaction have been undertaken during Assessment Year 2016-17, as 1 per cent in case of wholesale trading business and 3 per cent for all other transactions.
In this regards, 'wholesale trading' shall be construed where:
i. purchase cost of finished goods is eighty per cent or more of the total cost pertaining to such trading activity; and
ii. average monthly closing inventory of such goods is ten per cent or less of sales pertaining to such trading activity.
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