“transactional net margin method”

Transfer PricingSection 92CSection 92C691 judgments

The decision most relied on for transactional net margin method is Rampgreen Solutions Pvt. Ltd. v. CIT (377 ITR 533), cited in 196 judgments on BharatTax.

Leading authorities on transactional net margin method

Rampgreen Solutions Pvt. Ltd. v. CIT

377 ITR 533 · 2015 · High Court

196

citing judgments

Knowledge Process Outsourcing (KPO) service providers are functionally dissimilar to Business Process Outsourcing (BPO) or Information Technology Enabled Services (ITeS) providers and cannot be compared for transfer pricing purposes, even under the Transactional Net Margin Method (TNMM). Further, companies with significantly different business models, such as those with extensive subcontracting, should be excluded as comparables.

DIT (IT) v. Morgan Stanley & Co Inc.

162 Taxmann 165 · 2007 · Supreme Court

citing judgments

The profits of a Permanent Establishment (PE) must be determined on the basis of what an independent enterprise would derive, using the Transactional Net Margin Method (TNMM) for profit attribution. When applying TNMM, the operating profit from an international transaction should be compared with the operating profit margin of comparables.

CIT v. Pentair Water India (P.) Ltd.

381 ITR 216 · 2016 · High Court

citing judgments

Companies with significantly higher turnover, indicating differing functional and risk profiles, are not comparable for transfer pricing benchmarking. Such large companies must be excluded from the list of comparables when benchmarking against an assessee with a much smaller turnover.

Huawei Technologies India Pvt. Ltd. v. JCIT

101 Taxmann.com 313 · 2019 · ITAT

citing judgments

Working capital adjustments are permissible and crucial for comparability analysis when determining the arm's length price of international transactions, especially when an assessee's claim for such adjustment has been denied.

Trilogy E-Business Software India (P.) Ltd. v. Dy. CIT

29 Taxmann.com 310 · 2013 · ITAT

citing judgments

For Transfer Pricing, this case clarifies that foreign exchange gains can be considered operating revenue for ITES providers, acknowledges the impact of offshore versus onsite development pricing on margins even when using TNMM, and affirms the use of a turnover filter for selecting comparable companies.

Dresser-Rand India (P.) Ltd. v. Addl. CIT

13 Taxmann.com 82 · 2011 · High Court

citing judgments

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.

Serdia Pharmaceuticals (India) (P.) Ltd. v. Asstt. CIT

44 SOT 391 · 2011 · ITAT

citing judgments

The Comparable Uncontrolled Price (CUP) method is preferred over indirect methods for determining the arm's length price in transfer pricing matters, especially for royalty payments.

Mobis India Ltd. v. Dy. CIT

38 Taxmann.com 231 · 2013 · ITAT

citing judgments

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.

Judgments citing transactional net margin method

Netradyne Technology India Private Limited, Bengaluru vs. Income Tax Officer, Ward-5(1)(1), Bengaluru

In the result, the appeal filed by the assessee is partly allowed

ITA 2258/BANG/2024[2021-22]Status: DisposedITAT Bangalore10 Sept 2025AY 2021-22

Bench: Shri Prashant Maharishi & Shri Keshav Dubeyassessment Year : 2021-22

For Appellant: Shri Suresh Muthukrishnan, ARFor Respondent: Dr. Divya K J, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 144Section 92C

software development services , In Transfer pricing Study Report [ TPSR], The assessee, selecting itself as a tested party, Page 3 of 18 has adopted Transactional Net Margin Method [TNMM] as the Most Appropriate method, selecting Proft level indicator of NCP computing its margin at 15% choosing 'Prowess' and 'capitaline database' selected ... development service is at arm’s length. 5. In Purchase of software license for distribution segment, assessee taking itself as tested party, selected Transactional Net margin method as the most appropriate method adopting Profit level indicator of Operating profit margin of assessee at (-) 419.04% selected 4 companies whose margins ranging

Ust Global Technology Services (India) Private Limited, Kochi vs. DCIT, Corporate Circle 2(1), Kochi

In the result, appeal filed by the assessee stands partly allowed

ITA 1071/COCH/2024[2021-22]Status: DisposedITAT Cochin08 Sept 2025AY 2021-22

Bench: Shri Inturi Rama Rao, Am & Shri Rahul Chaudhary

For Appellant: Respondent byFor Respondent: Shri Rajakannam, Advocate

Section 143Section 92C

guarantee provided to the Assessee by the AEs Nil Other Method 3 The appellant-company also submitted TP study by adopting by adopting Transactional Net Margin Method (TNMM) as most appropriate method and sought to justify the international transactions are at arm's length price (ALP). On noticing the above

M/S. Hydro Bs India Private Limited, Bengaluru vs. Deputy Commissioner of Income Tax, Circle-3(1)(1), Bengaluru

The appeal of the assessee is partly allowed

ITA 2117/BANG/2024[2020-21]Status: DisposedITAT Bangalore04 Sept 2025AY 2020-21

Bench: Shri Prashant Maharishi & Shri Keshav Dubeyassessment Year: 2020-21

For Appellant: Shri Harsha, CAFor Respondent: Dr. Divya K J, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 144CSection 92CSection 92C(3)(c)

examine Arm’s length price of International transactions. 7. Assessee in its Transfer pricing Study Report [ TPSR] benchmarked this international Transaction adopting Transactional Net Margin Method [TNMM] as the most appropriate method selecting the Profit level indicator [PLI] of operating profit to operating cost [OP/OC] ratio, selecting 17 comparable from

Ebix Travels Pvt. Ltd., New Delhi vs. DCIT, Circle 2(2)(1), Bangalore

In the result appeal of the assessee is partly allowed

ITA 47/BANG/2025[2021-22]Status: DisposedITAT Bangalore29 Aug 2025AY 2021-22

Bench: Shri Prashant Maharishi & Shri Soundararjan K

Section 143Section 144BSection 144CSection 234ASection 234BSection 32Section 92CSection 92D

dated 27/9/2024 under section 144C (5) of the act. The learned AO/TPO/DRP have also erred both in law and on facts by adopting transactional net margin method as the most appropriate method for determination of the arm's-length price of the impugned transaction in the documents maintained under section ... held that "other method" is not the Most appropriate method for determination of the arm's-length price, and he adopted the Transactional Net Margin Method [ TNMM] as the most appropriate method to compute the arm's-length price. The learned TPO than adopted the search process of applying certain

Garware Fulflex India Pvt Ltd, Mumbai vs. DCIT, Circle 1(1)(1), Mumbai

In the result, appeal of the assessee is partly allowed for

ITA 6751/MUM/2024[2021-22]Status: DisposedITAT Mumbai28 Aug 2025AY 2021-22

Bench: Smt. Beena Pillai () & Shri Om Prakash Kant ()

Section 143(3)Section 144C(13)Section 153

context. 5.7 The assessee's further objection, that once a working capital adjustment had been made in the determination of margins under the Transactional Net Margin Method (“TNMM"), no separate adjustment for interest on receivables was warranted, was also rejected. The Ld. DRP found that the assessee had not furnished ... underlying sale/services transactions, which were already benchmarked (b) any notional interest on such receivables was subsumed in the working capital adjustment under the Transactional Net Margin Method (TNMM) (c) the assessee being debt free entity with no interest cost and hence adjustment was unwarranted and (d) the credit period extended

M/S Takata India Pvt. Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 6835/DEL/2015[2011-12]Status: DisposedITAT Delhi28 Aug 2025AY 2011-12

Bench: Shri Prakash Chand Yadav & Manish Agarwalassessment Year: 2011-12 Takata India Pvt Ltd., Vs. Dcit, Circle 25(1), (Now Joyson Anand Abhishek New Delhi Safety Systems Pvt Ltd.,) Plot No.20, Sector-5, Imt Manesar, Gurugram (Haryana)-122050 Pan/Gir No. Aacct 7200 N (Appellant) .. ( Respondent)

For Appellant: NoneFor Respondent: Shri S.K.Jadhav, CIT (DR)

circumstances of the present case in rejecting most appropriate method, as selected by the appellant for benchmarking its international transactions and in applying transactional net margin method as most appropriate method. Without prejudice to the above that while applying TNMM as most appropriate method 4.That the ld Ld. AO/Transfer Pricing

Addl CIT Ltu, Mumbai vs. Bajaj Holding & Investment Ltd ( Foremerly Known As Bajaj Auto Ltd), Mumbai

In the result, appeal filed by the revenue is dismissed and appeal filed by the assessee stands partly allowed as indicated hereinabove

ITA 5510/MUM/2012[2007-08]Status: DisposedITAT Mumbai26 Aug 2025AY 2007-08

Bench: Smt. Beena Pillai () & Shri Renu Jauhri ()

Section 14ASection 80

that, the assessee only purchased machinery and tools from regular suppliers and sold the same to the AE in Indonesia. The assessee used transactional net margin method (TNMM) to bench mark this transaction. It is submitted that in the transfer pricing study report, the assessee regarded that it is following

Aapc India Hotel Management Private Limited, Delhi vs. Assessment Unit, Income Tax Department, Delhi

ITA 3588/DEL/2024[2020-21]Status: DisposedITAT Delhi26 Aug 2025AY 2020-21

Bench: Shri Sudhir Pareek & Shri Avdhesh Kumar Mishra

Section 143(3)Section 144BSection 144CSection 153Section 156Section 23Section 234BSection 234C

availing technical consultancy services. In doing so, the Ld. TPO/L4 DRP erred in: a. Disregarding the benchmarking approach of the Appellant of applying Transactional Net Margin Method (TNMM) as the most appropriate method for determining the arm's length price of technical consultancy services. b. Incorrectly determining a NIL price

ACIT-8(1)(1), Mumbai vs. Reliance Life Sciences Pvt. Ltd., Navi Mumbai

ITA 2978/MUM/2025[2016-17]Status: DisposedITAT Mumbai25 Aug 2025AY 2016-17

Bench: Smt. Beena Pillai & Shri Girish Agrawal

For Appellant: Shri Nimesh Vora & Ms. Moksha Mehta, CAsFor Respondent: Shri Asif Karmali, Sr. DR

Section 143(3)Section 35Section 92F

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH MUMBAI BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT

Novateur Electrical and Digital Systems Pvt Ltd., Mumbai vs. Asst CIT 10(3)(1), Mumbai

In the result, appeal of the assessee is partly allowed and that by the Revenue is dismissed

ITA 944/MUM/2020[2012-13]Status: DisposedITAT Mumbai25 Aug 2025AY 2012-13

Bench: Smt. Beena Pillai & Shri Girish Agrawalassessment Year: 2012-13

For Appellant: Shri Nikhil Tiwari and Shri Lekh Mehta, CAsFor Respondent: Shri Pankaj Kumar, CIT DR

Section 143(3)Section 32Section 92CSection 92C(2)

finished goods of INR 18,26,260 c) erred in rejecting the economic analysis conducted by the Appellant wherein the appellant applied Transactional Net Margin Method (TNMM), while the learned TPO selectively applied CUP for benchmarking the transaction of export of certain finished goods, d) erred in not considering

Dy CIT 10(3)(1), Mumbai vs. M/S Novateur Electricals and Digital Systems Pvt Ltd., Mumbai

In the result, appeal of the assessee is partly allowed and that by the Revenue is dismissed

ITA 1189/MUM/2020[2012-13]Status: DisposedITAT Mumbai25 Aug 2025AY 2012-13

Bench: Smt. Beena Pillai & Shri Girish Agrawalassessment Year: 2012-13

For Appellant: Shri Nikhil Tiwari and Shri Lekh Mehta, CAsFor Respondent: Shri Pankaj Kumar, CIT DR

Section 143(3)Section 32Section 92CSection 92C(2)

Red Hat India Private Limited, Mumbai vs. Assistant Commissioner of Income Tax/ITO/ Circle 15(3)(1), Mumbai

In the result, the appeal of the assessee is treated as partly allowed for statistical purposes

ITA 2442/MUM/2022[2018-19]Status: DisposedITAT Mumbai22 Aug 2025AY 2018-19

Bench: Shri Amit Shukla & Shri Arun Khodpiaassessment Year : 2018-19 Red Hat India Private Limited, Asst. Commissioner Of A-201, Supreme Business Park, Income Tax/Income Tax Officer, Supreme City, Vs. Circle-15(3)(1), Hiranandani Gardens, Mumbai. Powai, Mumbai-400076. Pan : Aabcr7097N (Appellant) (Respondent) For Assessee : Shri Ajit Jain, For Revenue : Shri Pankaj Kumar, Cit-Dr Date Of Hearing : 13-08-2025 Date Of Pronouncement : 22-08-2025 O R D E R Per Amit Shukla, J.M : The Aforesaid Appeal Has Been Filed By The Assessee Against The Final Assessment Order Dated 27/07/2022 Passed By The Acit, Circle 15(3)(1) Mumbai, U/S 144C(13) For The A.Y. 2018-19, In Pursuance To The Directions Issued By The Dispute Resolution Panel-2, Mumbai-2, Dated 15/06/2022 U/S 144C(5).

For Appellant: Shri Ajit JainFor Respondent: Shri Pankaj Kumar, CIT-DR

Section 144C(13)Section 144C(5)

revenue in this segment.‖ 7. Ld.TPO observed that, the assessee in its TP study benchmarked the transaction by using transactional net margin method (TNMM) and by using operating profits to operating revenue (OP/OR) as profit level indicator (PLI). The OP/OR of the tested party being the assessee company was computed ... shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely:-- (a) to (d)…………. (e) transactional net margin method, by which,— (i) the net profit margin realised by the enterprise from an international transaction [or a specified domestic transaction] entered into with

Prithvi Information Solutions Limited, Hyderabad vs. ACIT, Circle-16(2), Hyderabad

In the result, appeal filed by the assessee is partly allowed for statistical purposes

ITA 47/HYD/2017[2010-11]Status: DisposedITAT Hyderabad20 Aug 2025AY 2010-11

Bench: Shri Vijay Pal Rao & Shri Madhusudan Sawdia

For Appellant: Shri P. Murali MohanRao, C.AFor Respondent: Shri Narender Kumar Naik

Section 143(3)

Most Appropriate Method (“MAM”) for benchmarking of its international transaction relating to SDS. However, the Ld. TPO rejected the CPM and applied the Transactional Net Margin Method (“TNMM”) as MAM. Inviting our attention to page no.11 of the Ld. TPO’s order, the Ld. AR pointed out that

Rubicon Research Limited (Formerly Known As Rubicon Research Private Limited), Thane, Maharashtra vs. Deputy Commissioner of Income Tax - Circle 15(3)(1), Mumbai

In the result, assessee’s appeal is allowed for statistical purposes

ITA 6647/MUM/2024[2021-22]Status: DisposedITAT Mumbai18 Aug 2025AY 2021-22

Bench: Smt. Beena Pillai & Smt. Renu Jauhriआयकर अपील सं./Ita No.6647/Mum/2024 (निर्धारण वर्ा/Assessment Year: 2021-22) Rubicon Research V/S. Deputy Commissioner Of Limited (Formerly बिधम Income Tax- Circle Known As Rubicon 15(3)(1), Mumbai Research Private Aaykar Bhavan, Maharshi Limited) Karve Road, New Marine Medone House, B-75, Lines, Churchgate, Mumbai Road No. 33, Wagle 400020 Estate, Thane 400604. Assessment Unit, National Faceless Assessment Centre Income Tax Department, Ministry Of Finance Delhi स्थायी लेखा सं./जीआइआर सं./Pan/Gir No: Aabcr1422M Appellant/अपीलधर्थी .. Respondent/प्रनिवधदी निर्ााररती की ओर से /Assessee By: Shri. Darpan Kirpalani रधजस्व की ओर से /Revenue By: Shri. Asif Karmali (Sr Dr)

For Appellant: Shri. Darpan KirpalaniFor Respondent: Shri. Asif Karmali (SR DR)

Section 143(3)Section 153Section 234BSection 37Section 92CSection 92C(3)Section 92D

Other Support Services Are Already Included in the Cost Base under TNMM: Separate Adjustment Leads to Double Taxation 1. The Assessee adopted the Transactional Net Margin Method (TNMM) as the Most Appropriate Method ("MAM") for benchmarking its international transactions. The international transactions included: • Export of finished goods

M/S Geodis Overseas Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

In the result, both the appeals are partly allowed for statistical purposes

ITA 3196/DEL/2017[2004-05]Status: DisposedITAT Delhi13 Aug 2025AY 2004-05

Bench: Shri S Rifaur Rahman & Shri Vimal Kumarita No. 3195/Del/2017 Assessment Year: 2003-04 Ita No. 3196/Del/2017 Assessment Year: 2004-05 Geodis Overseas Pvt.Ltd., Vs. Asstt. Commissioner Of Building No.5,Tower B, Income Tax, 10Th Floor, Dlf Cyber City, Company Circle- Ii(1), Phase Iii, Gurgaon Chennai-34 Pin: 122 002 Pan No. Aaacc6168L (Appellant) (Respondent)

For Appellant: Shri Vishal Kalra, Adv. & ShriFor Respondent: Ms. Neeju Gupta, Sr. DR

Section 250Section 92C

length in terms of the provisions of the Act. The Appellant has benchmarked the international transactions pertaining to freight forwarding using. Transactional Net Margin Method ("TNMM") as the most appropriate method with net profit margin ("NPM") on sales (refer pages 461 to 469 of the paper book ... that while the transfer pricing study report mentions CUP as most appropriate method, the related column in the Form 3CEB states that TNMM (Transaction Net Margin Method) is most appropriate method, even as the assessee subsequently clarifies that of CUP. It was explained by the assessee that

M/S Geodis Overseas Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

ITA 3195/DEL/2017[2003-04]Status: DisposedITAT Delhi13 Aug 2025AY 2003-04

Bench: Shri S Rifaur Rahman & Shri Vimal Kumar

For Appellant: Shri Vishal Kalra, Adv. & ShriFor Respondent: Ms. Neeju Gupta, Sr. DR

Section 250Section 92C

Raajratna Energy Holdings Private Limited, Hyderabad vs. Deputy Commissioner of Income Tax, Central Circle-2(2), Bangalore

ITA 1185/BANG/2025[2018-19]Status: DisposedITAT Bangalore11 Aug 2025AY 2018-19

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan K

For Appellant: Shri. Ramesh Babu, CAFor Respondent: Shri. Swaroop Manava, Addl. CIT(DR)(ITAT), Bangalore

Section 14ASection 56(2)Section 56(2)(viib)

INCOME TAX APPELLATE TRIBUNAL "B" BENCH : BANGALORE BEFORE SHRI. LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI. SOUNDARARAJAN K, JUDICIAL MEMBER

Raajratna Energy Holdings Private Limited, Hyderabad vs. Deputy Commissioner of Income-Tax, Central Circle-2(2), Bengaluru

ITA 1184/BANG/2025[2017-18]Status: DisposedITAT Bangalore11 Aug 2025AY 2017-18

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan K

For Appellant: Shri. Ramesh Babu, CAFor Respondent: Shri. Swaroop Manava, Addl. CIT(DR)(ITAT), Bangalore

Section 14ASection 56(2)Section 56(2)(viib)

INCOME TAX APPELLATE TRIBUNAL "B" BENCH : BANGALORE BEFORE SHRI. LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI. SOUNDARARAJAN K, JUDICIAL MEMBER

Xilinx India Technology Services Private Limited, Hyderabad vs. Dy. Commissioner of Income Tax, Circle-17(2), Hyderabad

In the result, the appeals filed by the assessee is partly allowed

ITA 1761/HYD/2019[2015-16]Status: DisposedITAT Hyderabad08 Aug 2025AY 2015-16

For Appellant: Shri SP Chidambaram, AdvocateFor Respondent: Shri B. Bala Krishna, CIT-DR

Section 143(3)Section 144C(5)Section 92C

mere presence of some minor differences cannot be a reason to exclude the companies from the set of comparbales, especially when the Transactional Net Margin Method (TNMM) is adopted. Under TNMM, he argued, some degree of functional difference can be tolerated, and the overall similarity of software development

Sony India Private Limited, New Delhi vs. ACIT, Circle-22(2), Delhi

ITA 2052/DEL/2022[2018-19]Status: DisposedITAT Delhi08 Aug 2025AY 2018-19

Bench: Shri Anubhav Sharma & Shri Manish Agarwal

For Appellant: Shri Nageshwar Rao, Advocate &For Respondent: Shri S.K. Jhadav, CIT-DR

Section 143(3)

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: H : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH