“TNMM”

Transfer PricingSection 92CSection 92C2,208 judgments

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

Leading authorities on TNMM

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.

Bausch & Lomb Eye Care (India) Pvt. Ltd. v. Additional CIT

381 ITR 227 · 2016 · High Court

127

citing judgments

The existence of an international transaction must be established before its arm's length price can be determined. An alleged 'excessive' AMP expenditure cannot unilaterally expand the scope of an international transaction if its existence is contested.

SAP Labs India Pvt. Ltd. v. ACIT

44 SOT 156 · 2011 · ITAT

100

citing judgments

Foreign exchange fluctuation gains or losses are operational in nature and must be included in the computation of the operating margin for both the assessee and comparable companies when determining the Arm's Length Price.

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.

Ranbaxy Laboratories Ltd. v. ACIT

68 Taxmann.com 322 · 2016 · High Court

citing judgments

When benchmarking export transactions, the Associated Enterprise (AE) can be considered the tested party if it possesses the least complex functional analysis. The Assessing Officer's acceptance of a methodology in prior years can also support its use.

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.

Capital IQ Information Systems India Pvt. Ltd. v. DCIT

32 Taxmann.com 21 · 2013 · ITAT

citing judgments

A change in depreciation policy impacts an entity's profitability, which is a key factor in assessing its suitability as a comparable company for transfer pricing analysis.

Electronic for Imaging (I) Pvt. Ltd. v. DCIT

85 Taxmann.com 124 · 2017 · ITAT

citing judgments

Comparability of a company for transfer pricing purposes must be decided afresh by the TPO after considering the facts recorded in prior tribunal decisions. The tribunal may direct exclusion of comparable companies based on such prior decisions.

Judgments citing TNMM

Everest Business Advisory India Pvt. Ltd., New Delhi vs. ACIT, New Delhi

In the result, the appeal is partly allowed

ITA 1907/DEL/2016[2010-11]Status: DisposedITAT Delhi29 Nov 2023AY 2010-11

Bench: Shri Saktijit Dey & Shri Pradip Kumar Kediaassessment Year: 2010-11 . Everest Business Advisory Vs. Acit, India Pvt. Ltd., Circle-11(1), A-1/B-27, Janak Puri, New Delhi New Delhi Pan :Aabce2871R (Appellant) (Respondent)

providing such services, the assessee earned revenue of Rs.5,66,09,811/-. The assessee benchmarked such transaction by adopting Transaction Net Margin Method (TNMM) as the most appropriate method with Operating Profit (OP)/Operating Cost (OC) as the Profit Level Indicator (PLI). Assessee selected nine comparables stated to be functionally

Denso Haryana Pvt. Ltd., New Delhi vs. DCIT, Circle- 10(1), New Delhi

In the result, appeal is allowed

ITA 3811/DEL/2017[2010-11]Status: DisposedITAT Delhi17 Nov 2023AY 2010-11

Bench: Shri Saktijit Dey, Vice- & Dr. Brr Kumarassessment Year: 2010-11 Denso Haryana Pvt. Ltd., Versus Dcit, Circle 10(1), B-1/D-4, Ground Floor, Mohan New Delhi. Cooperative Industrial Estate, Mathura Road, Badarpur, New Delhi. Pan:Aaacd6817F (Appellant) (Respondent) Assessee By : Sh. Himanshu S. Sinha, Adv. Sh. Bhuwan Dhoopar, Adv. Revenue By : Sh. Rajesh Kumar, Cit-Dr Date Of Hearing : 04.09.2023 Date Of Pronouncement: 17.11.2023

For Appellant: Sh. Himanshu S. Sinha, AdvFor Respondent: Sh. Rajesh Kumar, CIT-DR

Section 92B

aggregate approach and clubbed all the transactions together to benchmark for determination of Arm’s Length Price (ALP) by selecting transactional net margin method (TNMM) as most appropriate method with operating profit to total cost as profit level indicator. Since the margin of the assessee computed at 16.23% was more ... reply vide letter dated 15.10.2013 with information/details called for. In the said reply, the assessee also justified the aggregate approach adopted for benchmarking under TNMM. The TPO, however, was not convinced with the submissions of the assessee. He was of 5 the view that in terms of section

Honda R & D (India) Pvt. Ltd., Haryana vs. DCIT, New Delhi

In the result, appeal is partly allowed

ITA 5767/DEL/2012[2008-09]Status: DisposedITAT Delhi17 Nov 2023AY 2008-09

Bench: Shri Saktijit Dey, Vice- & Dr. Brr Kumarassessment Year: 2008-09 Honda R & D (India) Pvt. Ltd., Versus Dcit, Circle 12(1), Technical Centre, Plot No. 02, New Delhi. Sector-03, Imt Manesar, Gurgaon. Pan: Aabch3071N (Appellant) (Respondent) Assessee By : Sh. Nageshwar Rao, Adv. & Sh. Parth, Advocate Revenue By : Sh. Rajesh Kumar, Cit-Dr

For Appellant: Sh. Nageshwar Rao, Adv. &For Respondent: Sh. Rajesh Kumar, CIT-DR

Section 143(3)Section 144C

with AEs, the assessee has undertaken economic analysis. In the transfer pricing study report (TPSR), the 3 assessee has applied transactional net margin method (TNMM) as the most appropriate method to benchmark the international transaction with AEs. Operating profit (OP) to operating cost (OC) ratio was used as profit level

DCIT 2(3), Mumbai vs. Zensar Technologies Ltd, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 8389/MUM/2010[2005-06]Status: DisposedITAT Mumbai13 Nov 2023AY 2005-06

Bench: Shri Vikas Awasthy& Shri S. Rifaur Rahmanआअसं.8389/मुं/2010 (िन.व. 2005-06) Dcit-2(3), Room No.555, 5Th Floor, Aaykar Bhavan, M.K.Road, Mumbai – 400 020 ...... अपीलाथ"/Appellant बनाम Vs. M/S. Zensar Technologies Ltd., Magnet House, 2Nd Floor, N.M.Marg, Ballard Estate, Mumbai – 400 001 Pan: Aaacz 0742 K ....."ितवादी/Respondent अपीलाथ" "ारा/ Appellant By : Shri Manoj Kumar, Cit - Dr "ितवादी"ारा/Respondent By : Shri Nitesh Joshi, Advocate सुनवाई की ितिथ/ Date Of Hearing : 22/08/2023 घोषणा की ितिथ/ Date Of Pronouncement : 13/11/2023 आदेश/Order Per Vikas Awasthy, Jm:

For Appellant: Shri Manoj Kumar, CIT - DRFor Respondent: Shri Nitesh Joshi, Advocate

Section 10ASection 244ASection 92C

assessee inter-alia provided software development services to its Associated Enterprise(AE). To benchmark the transaction, the assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method. The same was accepted by the Transfer Pricing Officer (TPO). The assessee selected 28 companies as comparable having an average ... Assessing Officer made a reference to the TPO u/s. 92CA(1) of the Income Tax Act, 1961 [in short ‘the Act’]. The TPO accepted TNMM applied by the assessee as most appropriate method, however, he rejected 24 companies out 28 selected by the assessee as comparable. The TPO thereafter, introduced

M/S. ACIT, New Delhi vs. M/S. Bbc World (India) Pvt. Ltd., New Delhi

In the result, the appeal filed by the Revenue and the cross objection

ITA 5640/DEL/2011[2004-05]Status: DisposedITAT Delhi10 Nov 2023AY 2004-05

Bench: Shri Shamim Yahya & Ms. Astha Chandraacit, Circle 2 (1), Vs. M/S. Bbc World (India) Pvt.Ltd., New Delhi. 518-522, World Trade Centre, Babar Road, New Delhi. (Pan : Aabcb5209Q) Co No.51/Del/2012 (In Ita No.5640/Del/2011) (Assessment Year: 2004-05) M/S. Bbc World (India) Pvt.Ltd., Vs. Acit, Circle 2 (1), 518-522, World Trade Centre, New Delhi. Babar Road, New Delhi. (Pan : Aabcb5209Q) (Appellant) (Respondent) Assessee By : Shri Darpan Kirpalani, Advocate Revenue By : Shri Manu Chaurasia, Sr. Dr Date Of Hearing : 19.10.2023 Date Of Order : 10.11.2023 Order

For Appellant: Shri Darpan Kirpalani, AdvocateFor Respondent: Shri Manu Chaurasia, Sr. DR

mercantile. The following international transaction was undertaken by the assessee :- S.No. Description of transaction Method Value (in Rs.) 1. Providing market Support Service & TNMM 10,22,44,145 Other Miscellaneous services 2. Providing distribution support TNMM 1,03,33,354 services 3. Interest on ECB loan

Lanxess India P.Ltd, Thane vs. Asst CIT Cir 1, Thane

In the result, the appeal filed by the assessee is treated as allowed

ITA 7220/MUM/2017[2013-14]Status: DisposedITAT Mumbai31 Oct 2023AY 2013-14

Bench: Shri B.R. Baskaran (Am) & Shri Narender Kumar Choudhry (Jm)

Section 143(3)Section 144C(13)

should be deleted. 2. On the facts and circumstances of the case and in law, the learned AO/TPO erred in considering two methods (TNMM and CUP Method) for calculating Arms' Length Price of international transactions and making adjustment based on the method on which Transfer Pricing adjustment to the Assessee ... learned AO/TPO/DRP erred in treating unutilized capacity cost and start-up & downtime cost as operating in nature while calculating margins under TNMM for export of finished goods (Manufacturing segment). It is prayed that the learned AO/TPO be directed to treat the unutilized capacity cost and start-up & downtime cost

M/S Sanofi India Ltd (Formerly Known As Aventis Pharma Ltd, Mumbai vs. The ACIT RG 8(1), Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 1606/MUM/2007[2003-2004]Status: DisposedITAT Mumbai31 Oct 2023AY 2003-2004

Bench: Shri Vikas Awasthy, Hon’Ble & Shri S. Rifaur Rahman, Hon'Ble

Section 271(1)(c)

exports of active formulations, bulk drugs, payment of commission, etc. and benchmarked them in the transfer pricing study report applying transactional net margin method (TNMM). Since, the operating margin shown by the assessee at 13.83% was more than the mean operating margin of the comparable companies worked ... selectively segregated payment of commission as an independent transaction for benchmarking while accepting the other transactions. He submitted, when the TPO has accepted TNMM as the most appropriate method in respect of other closely linked transactions, he should not have segregated the payment of commission. The learned senior counsel submitted

ACIT- 3(1)(1), Mumbai vs. Mm/S Sanofi India Limited (Formerly Known As Aventis Pharma Ltd)., Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 1302/MUM/2007[2003-2004]Status: DisposedITAT Mumbai31 Oct 2023AY 2003-2004

Bench: Shri Vikas Awasthy, Hon’Ble & Shri S. Rifaur Rahman, Hon'Ble

Section 271(1)(c)

M/S. Lubrizol Advanced Materials India Pvt Ltd, Mumbai vs. Assessment Unit (Income Tax Dept), Delhi

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

ITA 464/MUM/2023[2017-18]Status: DisposedITAT Mumbai25 Oct 2023AY 2017-18

Bench: Shri S Rifaur Rahman, Am & Ms. Kavitha Rajagopal, Jm M/S. Lubrizol Advanced Materials India Assessment Unit (Income Tax Pvt. Ltd. Department) App & Bus Centre, 6Th Floor, Delhi Mehra Inudstrial Estate, Vs. Jaswanti Landmark, Lbs Marg, Mumbai-400 079

For Appellant: Shri Madhur AgrawalFor Respondent: 11.08.2023

Section 143(3)Section 144BSection 144C(13)Section 260

erred in confirming the action of learned TPO of rejecting the benchmarking analysis using Transaction Net Margin Method (‘TNMM’) conducted by Appellant, based on the comparable companies selected by Appellant thereby making an addition of Rs.6,57,04,938 of the alleged difference in the arm’s length price ... determined the ALP accordingly. The ld. Transfer Pricing Officer ('TPO' for short) rejected the bench marking analysis adopted by the assessee by applying TNMM method and also rejected the comparable companies considered by the assessee. The assessee had raised its objection before the Hon’ble DRP which had confirmed

Citigroup Global Markets (India) Private Limited, Mumbai vs. DCIT, Circle-4(1), Mumbai

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

ITA 72/MUM/2018[2010-11]Status: DisposedITAT Mumbai25 Oct 2023AY 2010-11

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm Citigroup Global Markets (India) Private Limited The Dcit 1402, 14Th Floor, Circle -4(1), First International Financial Aaykar Bhavan Centre, Vs. M.K. Road, Bandra Kurla Complex, Mumbai-400 020 G Block, Bandra (East), Mumbai-400 051 (Appellant) (Respondent) Pan No.Aaecs7234F Citigroup Global Markets (India) The Jcit (Osd) Private Limited 4(1)(1) 1402, 14Th Floor, Room No. 640, 6 Th Floor, First International Financial Aaykar Bhavan, Centre, Vs. M.K. Road, Bandra Kurla Complex, G Block, Bandra (East), Mumbai-400 020 Mumbai-400 051 (Appellant) (Respondent) Assessee By : Shri Nishant Thakkar & Mr. Jasmin Amalsadwala, Ars Revenue By : Ms. Vranda U. Matkari, Dr Date Of Hearing: 04/08/2023 Date Of Pronouncement : 25/10/2023

For Appellant: Shri Nishant Thakkar &For Respondent: Ms. Vranda U. Matkari, DR

Section 143(3)Section 144CSection 73

brokerage fees of ₹181,49,41,232/- for the impugned assessment year. Assessee adopted the Transactional Net Margin Method[ TNMM] as the most appropriate method [ MAM] for benchmarking research support services. The assessee’s benchmarking shows that assessee has earned a margin of 15%. Assessee selected four comparable companies whose

Joint Commissioner of Income Tax (OSD)-4(1)(1), Mumbai vs. Citigroup Global Markets (India) Private Limited, Mumbai

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

ITA 45/MUM/2018[2010-11]Status: DisposedITAT Mumbai25 Oct 2023AY 2010-11

For Appellant: Shri Nishant Thakkar &For Respondent: Ms. Vranda U. Matkari, DR

Section 143(3)Section 144CSection 73

Tech Mahindra Ltd, Mumbai vs. DCIT Cir 2(3), Mumbai

Appeal is dismissed and assessee's appeal is partly allowed

ITA 3643/MUM/2012[2007-08]Status: DisposedITAT Mumbai25 Oct 2023AY 2007-08

Bench: Shri Amit Shukla () & Ms. Padmavathy S. ()

Section 92C(3)

upfront discount payment of Rs.524,93,80,079/-. 19. As far as this international transaction is concerned, the assessee has benchmarked the transaction following TNMM. It is relevant to note here that the assessee has not debited the P&L Account towards the upfront discount payment and not claimed

DCIT 22(3), Mumbai vs. Tech Mahindra Ltd, Mumbai

Appeal is dismissed and assessee's appeal is partly allowed

ITA 3531/MUM/2012[2007-08]Status: DisposedITAT Mumbai25 Oct 2023AY 2007-08

Bench: Shri Amit Shukla () & Ms. Padmavathy S. ()

Section 92C(3)

Sumitomo Corporation India Private Limited, New Delhi vs. DCIT, Circle-21(2), New Delhi

In the result Appeal filed by the Assessee is partly allowed for statistical purpose

ITA 486/DEL/2022[2017-18]Status: DisposedITAT Delhi18 Oct 2023AY 2017-18

Bench: Shri G. S. Pannu & Shri Yogesh Kumar U.S.

For Appellant: ShriFor Respondent: Shri Vivek Verma

Section 143(3)Section 144Section 144BSection 144C(13)Section 92CSection 92C(3)

Appellant to determine the arm's length price ("ALP") of its international transactions. The Appellant's use of Transactional Net Margin Method ("TNMM") with operating profit/operating expenses ("OP/OPEX") as the profit level indicator ("PLI") has been disregarded without any justification whatsoever. 5. The Ld. AO / TPO has disregarded the directions ... that the average rate of commission earned in non-AEs segment cannot be considered to determine arm length's commission rate; and held that TNMM with Berry ratio (modified form of OP/OPEX) as the PLI should be accepted as the most appropriate method; 6.3. the directions

Karcher Cleaning Systems Pvt. Ltd., New Delhi vs. Addl. CIT Spl. Range-5, New Delhi

In the result, Appeal filed by the Assessee is partly allowed for statistical purposed

ITA 4986/DEL/2019[2014-15]Status: DisposedITAT Delhi18 Oct 2023AY 2014-15

Bench: Shri G. S. Pannu & Shri Yogesh Kumar U.S.

For Appellant: Shri Rohit TiwariFor Respondent: Shri Mrinal Kumar Das

Section 143(3)Section 144C(3)

Karcher Cleaning Systems, ND 3.4 disregarding the application of Resale Price Method on frivolous grounds; 3.5 upholding the application of Transactional Net Margin Method (“TNMM”) to determine the arm’s length price (“ALP”) of international transaction undertaken by the Appellant; 3.6 disregarding certain comparable companies selected by the Appellant ... have erred in disregarding the fresh search submitted by the Appellant on a without prejudice basis, during the course of assessment proceedings, considering TNMM as the most appropriate method; 5. That on the facts and circumstances of the case, the Ld. CIT(A) / Ld. AO / Ld. TPO have grossly erred

Haier Appliances India Private Limited, Delhi vs. DCIT, It & Tp Delhi 2(1)(1), New Delhi

In the result the appeal of the assessee in ITA No

ITA 417/DEL/2022[2017-148]Status: DisposedITAT Delhi17 Oct 2023AY 2017-148

Bench: Shri N.K. Billaiya & Ms Astha Chandra

For Appellant: Shri Nageshwar Rao, AdvFor Respondent: Shri Rajesh Kumar, CIT-DR

Section 143(3)Section 254Section 92BSection 92F

making incorrect adjustments under garb of intensity adjustment which is not as per prescribed Rules for application of Transactional Net Margin Method (TNMM) and that in absence of availability of adequate and accurate data in public domain, ad-hoc adjustment is not permissible under provision of Act and Rules

Ups Express Private Limited (Formerly Known As Ups Jetair Express Private Limited), Mumbai vs. Dy.CIT 3(1) (1) Addl/Jt/Dy/CIT/ITO/NFAC-Delhi, Mumbai

In the result, appeal of the assessee is partly allowed

ITA 2439/MUM/2022[2018-19]Status: DisposedITAT Mumbai16 Oct 2023AY 2018-19

Bench: Shri Prashant Maharishi, Am & Shri Sandeep Singh Karhail, Jm Ups Express Pvt. Ltd. (Formerly Known As Ups Jetair Dcit-3(1)(1) Express Pvt. Ltd. Aaykar Bhavan, M.K. Road, 6-A, Shyam Off Jvlr, Majas Vs. Mumbai-400020 Village, Jogeshwari(E) Mumbai-400060 (Appellant) (Respondent) Pan No. Aaacu4322N Assessee By : Shri Nitesh Joshi Revenue By : Shri Dhiraj Kumar Date Of Hearing: 18.07.2023 Date Of Pronouncement : 16.10.2023

For Appellant: Shri Nitesh JoshiFor Respondent: Shri Dhiraj Kumar

Section 131

operating revenues as well as the operating costs for the purpose of aggregation of transactions and determining arm's length price under TNMM. Further, the TPO observed that the reimbursement of expenses pertaining to each segment is not available. He proceeded to apportion the expenses between the software development ... above ratio i.e. ₹ 1,56,87,128/- in the software development segment and ₹ 75,59,948 in the ITES segment for comparability analysis under TNMM. 30. Before DRP, the Assessee submitted that the reimbursement of expense received are nothing but expenses incurred on behalf of related parties for administrative convenience

Teradata India Pvt Ltd, Grugram vs. DCIT Circle-3(1), Gurugram

Appeal of the revenue is allowed for AY 2018-19

ITA 2337/DEL/2022[2018-19]Status: DisposedITAT Delhi13 Oct 2023AY 2018-19

Bench: Shri M. Balaganesh & Shri Yogesh Kumar Us

For Appellant: Shri Nageswar Rao, AdvFor Respondent: Shri Rajesh Kumar, CIT DR

Section 143(3)Section 37Section 80G

under:- S. Transaction Type Transaction Method used for No. Value (non us determining the segment) price 1. Purchase of hardware and software 155033679 TNMM for local distribution 2. Provision of GCC support Services 2489690928 TNMM 3. Provision of software support 954659566 TNMM Services 4 Availing of professional services 12785131 TNMM ... Subvention income 107394187 TNMM 6. Reimbursement of Expenses by AEs 23601270 Other method 7 Reimbursement of Expenses to AEs 187142084 TNMM 7. During the course of assessment proceedings before the ld TPO, the details of outstanding receivables from AEs by the assessee and details of outstanding payables to AEs were

ACIT-Circle-3(1), Gurgaon vs. Teradata India Private Limited, Gurgaon

Appeal of the revenue is allowed for AY 2018-19

ITA 1430/DEL/2022[2018-19]Status: DisposedITAT Delhi13 Oct 2023AY 2018-19

Bench: Shri M. Balaganesh & Shri Yogesh Kumar Us

For Appellant: Shri Nageswar Rao, AdvFor Respondent: Shri Rajesh Kumar, CIT DR

Section 143(3)Section 37Section 80G

Teradata India P.Ltd, Gurugram vs. DCIT, Circle-3(1), Gurugram

Appeal of the revenue is allowed for AY 2018-19

ITA 1248/DEL/2022[2017-18]Status: DisposedITAT Delhi13 Oct 2023AY 2017-18

Bench: Shri M. Balaganesh & Shri Yogesh Kumar Us

For Appellant: Shri Nageswar Rao, AdvFor Respondent: Shri Rajesh Kumar, CIT DR

Section 143(3)Section 37Section 80G