“most appropriate method”
The decision most relied on for most appropriate method is CIT v. Cushman & Wakefield (India) (P.) Ltd. (367 ITR 730), cited in 120 judgments on BharatTax.
Leading authorities on most appropriate method
This case determines the Arm's Length Price (ALP) for intra-group services and reimbursements, clarifying when charges constitute services warranting a mark-up versus mere pass-through costs. It provides guidance on the circumstances under which an ALP adjustment, including an ALP of 'nil', is appropriate for such transactions.
An Assessing Officer cannot disregard an assessee's decision to avail services from associated enterprises, even if the assessee has internal expertise, as the determination of necessity is the assessee's prerogative. The Transfer Pricing Officer's role is to determine the arm's length price, not the need for the service itself.
The headcount method is an appropriate allocation key for indirect expenses between eligible and non-eligible units when it has been consistently accepted by revenue authorities and there is no just cause for abandoning it. Deviation from a consistently followed and accepted method can disturb or distort profits.
A working capital adjustment is unreliable if it is based on broad approximations, estimations, and assumptions, and the assessee fails to demonstrate how the adjustment was arrived at.
The 'bright line test' is not an appropriate method for determining the existence of an international transaction for calculating arm's length price. This ruling overrules prior special bench decisions on AMP expenses.
The Assessing Officer (AO) or Transfer Pricing Officer (TPO) cannot dispute the application of the TNMM method if they have already accepted it as the most appropriate method for certain international transactions, especially when other transactions are intrinsically linked.
The Tribunal may allow adjustments for differences between the tested party and comparable companies to eliminate material differences, provided accurate and credible evidence is furnished.
The Resale Price Method (RPM) is the most appropriate method for determining the arm's length price of a distributor who does not add significant value to the goods purchased.
