Arm's length price as defined in section 173(a) of the Income-tax Act, 2025 is the price applied or…

Under section 173(a) of the Income-tax Act, 2025 (formerly s.92F(ii) of the 1961 Act), "arm's length price" means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions. The benchmark is therefore a transaction between unrelated persons in uncontrolled conditions; the options involving related persons (associated enterprises) or controlled conditions describe the transactions that the arm's length price is used to test, not the arm's length price itself.