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For determining the arm’s length price under the Income-tax Rules, 2026, which of the following is an uncontrolled transaction?

Question and options

For determining the arm’s length price under the Income-tax Rules, 2026, which of the following is an uncontrolled transaction?

  1. A transaction between enterprises that are not associated enterprises

  2. A transaction between two branches of the same enterprise abroad

  3. A transaction between associated enterprises that are both residents

  4. A transaction between associated enterprises, one of them a non-resident

Answer and explanation

Correct answer: A - A transaction between enterprises that are not associated enterprises

Rule 77(f) of the Income-tax Rules, 2026 defines an uncontrolled transaction as one between enterprises other than associated enterprises, whether resident or non-resident; such transactions supply the comparables for the arm’s length price. A transaction between associated enterprises is controlled whatever their residence, and dealings between branches of one enterprise are not between two enterprises at all.

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