Circular 5/2013

Section 92C of the Income-tax Act, 1961 - read with rule 10B of the Income-tax Rules, 1962 - Transfer Pricing - Compution of Arm's Length Price - Application of Profit Split Method - Withdrawal of Circular No. 2/2013, Dated 26-3-2013

What this is

Circular 5/2013 was issued by the Central Board of Direct Taxes on 29 June 2013. Its subject is Section 92C of the Income-tax Act, 1961 - read with rule 10B of the Income-tax Rules, 1962 - Transfer Pricing - Compution of Arm's Length Price - Application of Profit Split Method - Withdrawal of Circular No. 2/2013, Dated 26-3-2013.

What it does

Withdraws Circular No. 2 dated 26 March 2013 on the application of the profit split method, with immediate effect. The Board found that the withdrawn circular appeared to suggest that there is a hierarchy among the six methods listed in section 92C, and that the profit split method was the preferred one where unique intangibles or multiple interrelated international transactions were involved.

Why it was issued

The earlier circular was creating that impression of a hierarchy and of a preferred method, which the Board did not intend.

Who it reaches

Assessees with international transactions involving unique intangibles
Assessees with multiple interrelated international transactions
Transfer Pricing Officers selecting the most appropriate method
Advisers preparing method selection studies

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.92C	s.165

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 92C OF THE INCOME-TAX ACT, 1961 - READ WITH RULE 10B OF THE INCOME-TAX RULES, 1962 - TRANSFER PRICING - COMPUTION OF ARM'S LENGTH PRICE - APPLICATION OF PROFIT SPLIT METHOD - WITHDRAWAL OF CIRCULAR NO. 2/2013, DATED 26-3-2013
CIRCULAR NO. 5/2013 [F. NO. 500/139/2012-FTD-I], DATED 29-6-2013
The Central Board of Direct Taxes had issued Circular No. 2 (hereinafter called "the Circular") on 26th March 2013 regarding application of Profit Split Method.
2. It is noticed the Circular appeared to give the impression that there was a hierarchy among the six method listed in section 92C and that Profit Split Method (PSM) was the preferred method in the case involving unique intangible or in multiple interrelated international transactions.
3. Accordingly, the Central Board of Direct Taxes withdraws Circular No 2 dated 26th March 2013 with immediate effect.
The above may be brought to the notice of all concerned.

What to watch

The withdrawal restores the position that the six methods in section 92C stand without a hierarchy; the most appropriate method has still to be chosen on the facts.
It operates with immediate effect from 29 June 2013, so what happened while the earlier circular stood has to be looked at on its own footing.
Nothing positive is laid down here about when the profit split method should be used; the circular only takes away what was said before.

Where you meet it

Where a Transfer Pricing Officer presses the profit split method as the preferred method for intangibles or for a bundle of transactions, relying on the withdrawn circular.

What it names

Rules it names. Rule 10B of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

It mentions. Circular No. 2/2013, Circular No. 5/2013

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 157/2025 [F. No. 500/1/2014-APA-II] / SO 5053(E) — Ministry of Finance 6 November 2025
Notification No. 116/2024 [F. No. 500/1/2014-APA-II] / SO 4571(E) — Ministry of Finance 18 October 2024
Notification No. 46/2023 [F. No. 500/1/2014-APA-II] / SO 2777(E) — Ministry of Finance 26 June 2023
Notification No. 70/2022 [F. No. 500/1/2014-APA-II] / SO 2928(E) — Ministry of Finance 28 June 2022
Notification No. 124/2021 [F. No. 500/1/2014-APA-II] / S.O. 4586(E) — Ministry of Finance 29 October 2021
Notification No. 83/2020 [F.No.500/1/2014-APA-II] / SO 3660(E) — रुजचका िमा, अिर सजचि 19 October 2020

← Circular 7/DV/2013, dated 16-7-2013 · Circular 6/2013 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.