For the purpose of computation of arm's length price (ALP), the Indian Income-tax Act, 1961 (the Act), thus far, provided for five methods. In addition, the Act had made provision for a sixth method ("other method") to be prescribed by the Central Board of Direct Taxes (the Board).
The Board has now prescribed the "other method", by inserting Rule 10AB to the Indian Income-tax Rules, 1962 (the Rules). Rule 10AB of the Rules shall come into force with effect from April 1, 2012 and shall apply to assessment year 2012-13 (i.e. financial year 2011-12) and subsequent years. As per Rule 10AB of the Rules, the "other method" has been described as follows: