Comparison of Section 165 "Determination of arm's length price." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....fects taxpayers engaged in related-party cross-border or specified domestic transactions and the tax department. Effective date or decision date: Not stated in the document. Background & Scope Statutory hooks: Clause 165 (Bill) sits under "Special Provisions Relating to Avoidance of Tax" within the Income Tax Bill, 2025. The clause deals with determination of the arm's length price for international and specified domestic transactions. Definitions or explanatory notes: Not stated in the document. The clause lists the recognised transfer-pricing methods, prescribes selection and application principles for the "most appropriate method," and prescribes the AO's powers and procedure to determine arm's length price during assessmen....

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....roceedings, to determine the arm's length price under sub-sections (1)-(3) where, based on material in his possession, he is of the opinion that: (a) the price charged or paid has not been determined as per sub-sections (1)-(3); or (b) any information and document relating to the transaction has not been kept and maintained by the assessee as per section 168(1); or (c) the information or data used by the assessee is not reliable or correct; or (d) the assessee has failed to furnish, within specified time, any information or document required by a notice u/s 171(2). * Sub-section (5): Requires the AO, before determining ALP under sub-section (4), to give a notice calling upon the assessee to show cause why ALP should not be determined ....

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....to operationalise method selection and multi-price situations by reference to "as prescribed" language. Exceptions/Provisos The provision contains specific conditional statements rather than formal provisos. Notable carve-outs/conditions: the option to accept the actual transaction price despite a difference from the method-determined price is limited by a percentage ceiling not exceeding 3% as notified by the Central Government. The AO's power to act under sub-section (4) is conditional on being "of the opinion" based on material that one or more specified deficiencies exist (non-compliance with method, lack of records per section 168(1), unreliability of information, or failure to furnish information u/s 171(2)). Further details on ....

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.... Section 165 of the Income-tax Act, 2025 Topic Clause 165 (Old Version) Section 165 (Final) Practical Impact Record-keeping cross-reference Refers to section 168(1) as the obligation for keeping and maintaining information and documents (sub-s (4)(b)). Refers to section 171(1) for the same obligation (sub-s (4)(b)). Change in cross-reference may shift the statutory location of record-keeping requirements. Practically, this affects which specific statutory duty is the trigger for AO action; taxpayers must follow the final Act's cited section for compliance. (Further implications depend on the content of those sections; Not stated in the document.) Notice reference for failure to furnish Cites failure to furnish inform....

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....ion (4), with consequent reassessment risk and potential income enhancement that cannot be offset by deductions u/s 144 or Chapter VIII as per sub-section (7). * Record-keeping/evidence points: The clause makes material compliance with record-keeping obligations a trigger for AO action; therefore, contemporaneous transfer-pricing documentation and reliable data supporting the chosen method are essential. The AO must give a show-cause notice (sub-section (5)) before proceeding; preserving audit trails and records of responses to AO notices, and demonstrating reliability of comparables and data, are central to avoiding adverse re-determination. Key Takeaways * The clause codifies standard transfer-pricing methods and mandates selection o....