Assessee’s Contentions

Revenue’s Contentions

Court’s Judgement

• Entity-level TNMM was the Most Appropriate Method (MAM) and had been consistently accepted in earlier years. The business involved thousands of products and varied markets, making product-level comparison unreliable.

  
  

• Selection of only a limited number of products from a much larger product portfolio could not provide a reliable basis for determining arm's length pricing.

• Internal comparables are more direct and reliable than external comparables. Therefore, internal CPM should be applied to benchmark AE transactions on a product-by-product basis.

  
  

• The selected products represented comparable transactions and justified application of CPM.

• The ITAT held that TNMM remained the MAM. The Revenue failed to establish the high degree of comparability required for internal CPM. Significant differences existed in products, customers, markets, contractual terms, and risks, and no reliable adjustments were made.

  
  

• The Tribunal observed that benchmarking a small subset of products from a portfolio of around 9,000 products was not a reliable approach and could not override the taxpayer's aggregated TNMM analysis.