“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

Tpg Software Pvt. Ltd., Delhi vs. DCIT, Circle-25(2), New Delhi

In the result, the appeal of the assessee is dismissed

ITA 6468/DEL/2018[2014-15]Status: FixedITAT Delhi11 Sept 2023AY 2014-15

Bench: Sh. Kul Bharatdr. B. R. R. Kumar

For Appellant: Sh. Vishal Kalra, AdvFor Respondent: Sh. Rajesh Kumar, CIT DR

Section 143(3)Section 144C(13)Section 234Section 271(1)(c)Section 92C(3)(c)

rejected by the TPO and 6 have been introduced by the Revenue. The turnover of the company was Rs.43.53 Cr. 5. The TPSR considered TNMM as the MAM. 4 TPG Software Pvt. Ltd 6. The OP/OC as per the assessee

M/S Celio Future Fashion Private Limited, Mumbai vs. Addl/Jt/CIT/Dy/Asstt/ITO/NFAC, Delhi

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

ITA 741/MUM/2022[2017-18]Status: DisposedITAT Mumbai08 Sept 2023AY 2017-18

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Sumant ChadhaFor Respondent: Shri Pravin Salunkhe

Section 115BSection 143(3)Section 144BSection 144C(13)Section 144C(5)Section 144C(8)Section 69CSection 920Section 92C

Enterprises (AE), based on the observation of Transfer Pricing Officer (TPO) under section 920 of the Act by applying external Transaction Net Margin Method (TNMM). 1.1. Ld. DRP/AO has erred in rejecting Retail Sales Price (RPM) method adopted by the Appellant as the most appropriate method for justifying ... appellant and tested party. Without prejudice to above grounds, 1.3. Ld. DRP/AO has erred in law and facts of the case while applying external TNMM as the most appropriate method for benchmarking import of men's wear transaction with AE instead of internal TNMM. Hence, Appeal. 2. Treating loans

Intergreon Munaged Solutions (India) P.Ltd, Mumbai vs. Asst CIT 12(2)(2), Mumbai

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

ITA 586/MUM/2015[2010-11]Status: DisposedITAT Mumbai07 Sept 2023AY 2010-11

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Shri Ketan Ved

Section 250Section 92D

business support services and legal support services to its AEs. The assessee had bench marked its international transaction by applying transactional net margin method (TNMM) which method was also adopted by the ld. TPO for determining the ALP. The ld. A.O./TPO determined the total income by making transfer pricing ... transactions Value (Rs.) AY 2009-10 Method used No. AY 2010-11 1 Provision of Documentation 60,64,54,221 57,00,82,975 TNMM and Presentation services 2 Reimbursement - 18,403 CUP 18. The operating profit and operating cost accounts of the assessee has been worked out as following

Integreon Managed Solutions (India) P. Ltd, Mumbai vs. ITO 8(2)(1), Mumbai

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

ITA 2307/MUM/2012[2007-08]Status: DisposedITAT Mumbai07 Sept 2023AY 2007-08

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Shri Ketan Ved

Section 250Section 92D

ITO 8(2)(1), Mumbai vs. Integreon Managed Solution (I) P. Ltd, Mumbai

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

ITA 2095/MUM/2012[2007-08]Status: DisposedITAT Mumbai07 Sept 2023AY 2007-08

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Shri Ketan Ved

Section 250Section 92D

DCIT 14 (3)(1), Mumbai vs. Tata Communications Transformation Services Ltd., Mumbai

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

ITA 6240/MUM/2019[2008-09]Status: DisposedITAT Mumbai05 Sept 2023AY 2008-09

Bench: Shri B R Baskaran, Am & Ms. Kavitha Rajagopal, Jm Tata Communications Transformations Dy. Cit (Tp)-4(2)(1) Air India Building, 5Th Floor, Services Limited Vs. D-21/C 36, G Block Bandra Kurla Nariman Point, Mumbai-400 021 Complex, Mumbai-400 008 Pan/Gir No. Aaccv 3189 A (Assessee) : (Revenue) & Dy. Cit-14(3)(1) Tata Communications 4Th Floor, Room No. 455, Aayakar Transformation Services Ltd. Bhavan, M. K. Road, Mumbai-400 020 Plot No. C-21 & C-36 C Tower, Vs. Bkc Vidyanagri Po, Bandra Kurla Complex, Bandra (E), Mumbai-400 098 Pan/Gir No. Aaccv 3189 Q (Revenue) : (Assessee)

For Appellant: Shri Nitesh Joshi

Section 143(1)Section 143(2)Section 143(3)Section 144CSection 2Section 92C

Telecommunication Network Management Service 2. Provision of Finance and Accounting services and recovery (receipt) and reimbursement of expenses (paid). 4. The assessee had adopted TNMM method for determining the arm's length price ('ALP' for short) of international transaction entered into with its AE. The profit level indicator ... bench marked the said transaction of provision of Telecommunication Network Management Service (Rs.17.80 crores) and provision of supervision services (Rs.18.89 crores by using internal TNMM method. The assessee’s case was selected for scrutiny and the notice u/s. 143(2) and 142(1) of the Act dated

Tata Communications Transformations Services Limited, Mumbai vs. Dict (Tp)-4(2)(1, Mumbai

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

ITA 5882/MUM/2019[2008-09]Status: DisposedITAT Mumbai05 Sept 2023AY 2008-09

For Appellant: Shri Nitesh Joshi

Section 143(1)Section 143(2)Section 143(3)Section 144CSection 2Section 92C

Contitech India Pvt. Ltd., New Delhi vs. ACIT, New Delhi

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

ITA 2161/DEL/2017[2012-13]Status: DisposedITAT Delhi05 Sept 2023AY 2012-13

Bench: Sh. Kul Bharatdr. B. R. R. Kumar

For Appellant: NoneFor Respondent: Sh. Sanjay Kr. Bharati, CIT DR

Section 143(3)Section 144Section 37(1)Section 92C

That the assessing officer/TPO erred on facts and in law in not appreciating that the payment of corporate charges was appropriately benchmarked applying TNMM as most appropriate method and that no adverse inference could be drawn on this account. 2.3 That the assessing offices/TPO erred on facts ... corporate charges were made to the AE, the TPO rejected the entity wise benchmarking undertaken by the assessee in its transfer pricing study using TNMM, applied the CUP method and determined the ALP as Nil. The ITAT admitted additional evidences and set aside the matter

Ntt India Pvt. Ltd, Mumbai vs. Addl/Jt/Dy/ACIT/Tax/ITO, Delhi

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

ITA 722/MUM/2022[2017-18]Status: DisposedITAT Mumbai04 Sept 2023AY 2017-18

Bench: Shri B R Baskaran, Am & Ms. Kavitha Rajagopal, Jm Ntt India Pvt. Ltd. Addl/Jt/Dy./Acit/Tax/Ito 1701-1704, B-Wing, One Bkc Level, National Faceless Assessment Centre 17 G Block, Plot No. C-65, Vs. Delhi Bandra Kurla Complex, Bandra (E), Mumbai-400 051 Pan/Gir No. Aaacd 2145 G (Appellant) : (Respondent) Assessee By : Shri Vijay Mehta : Shri Sunil A Umap & Revenue By Shri Samuel Pitta Date Of Hearing : 06.06.2023 : 04.09.2023 Date Of Pronouncement

For Appellant: Shri Vijay Mehta

Section 143(3)

management services as Nil. 1.4 The Hon'ble DRP/Ld. TPO/ Ld. AO have erred in law by rejecting the Transactional Net Margin Method (TNMM) analysis adopted by the Appellant to benchmark its international transactions and applying the Comparable Uncontrolled Price ('CUP') Method in contravention of the provisions of Rule ... Nature of international transactions AY 2017-18 Method adopted for No. Amount (Rs.) bench marking 1 Sale of Goods 21,27,70,568 TNMM 2 Global Account Management Services Rendered 2,86,200 TNMM 3 Global Account Management Services Availed 5,53,88,656 TNMM 4 Management fees paid

Mondelez India Foods P.Ltd, Mumbai vs. Asst CIT RG 5(1)(2), Mumbai

ITA 1518/MUM/2017[2012-13]Status: DisposedITAT Mumbai31 Aug 2023AY 2012-13

Bench: Vikas Awasthy () & Ms. Padmavathy S. ()

Section 143(3)Section 144C(13)Section 14ASection 234ASection 234C

behalf of the TPO, the agreement for paying royalty on technical know-how at 1.25% and trademark usage at 1.25%, were overlapping and thus, TNMM method used by the assessee was incorrect. According to the TPO, the best method to ascertain ALP in the interest case ... relation to services availed from CHL (i.e. ground 11 to 13) are identical and as both the transactions have been benchmarked by MIFPL using TNMM, findings of ITAT for ground no. 8 to 10 are to be applied for ground no. 11 to 13 as well. The Tribunal has erroneously

Mondelez India Foods P. Ltd, Mumbai vs. DCIT RG 5(1)(2), Mumbai

ITA 1240/MUM/2016[2011-12]Status: DisposedITAT Mumbai31 Aug 2023AY 2011-12

Bench: Vikas Awasthy () & Ms. Padmavathy S. ()

Section 143(3)Section 144C(13)Section 14ASection 234ASection 234C

M/S Andritz Hydro Private Limited, Bhopal vs. The DCIT Circle 1(1), Bhopal

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

ITA 75/IND/2022[2017-18]Status: DisposedITAT Indore28 Aug 2023AY 2017-18

Bench: Shri Vijay Pal Rao & Shri B.M. Biyanim/S. Andritz Hydro Private Dcit Circe 1(1) Ltd. Bhopal Vs. D-17, Mpakvn Industrial Area, Mandideep Raisen (Appellant / Assessee) (Respondent/ Revenue) Pan: Aabcv 2466 R Assessee By Shri Rahul, Kaul Ar Revenue By Shri P.K. Mishra, Cit-Dr Date Of Hearing 13.06.2023 Date Of Pronouncement 28.08.2023

Section 143(3)Section 144C(13)Section 144C(5)Section 92C(3)

Total Amount 344,96,10,385/- 3. In the Transfer Pricing Study Report the assesse has benchmarked its International transactions by applying TNMM as the most appropriate method with PLI as OP/OC and compared with the internal unrelated/uncontrolled transactions of domestic sales having profit margin @ 10.62% in comparison ... upheld the transfer pricing study of the assesse in respect of international transactions. The TPO has erred in out rightly rejecting the TNMM as the most appropriate method and adopting CPM when the TNMM has been adopted by the assesse in the preceding years and upheld by the Tribunal

Asb International P. Ltd., Ambernath vs. Addl/Jt/Dy/Asstt/CIT/ITO, National E-Assessment Centre, Delhi

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

ITA 921/MUM/2021[2016-17]Status: DisposedITAT Mumbai25 Aug 2023AY 2016-17

Section 143(3)Section 144(5)Section 271(1)(c)Section 92C(1)(f)

payable only in respect of net domestic sales. As per the original TP study report assessee had used overall entity level TNMM approach for benchmarking the royalty payment. Thereafter, assessee adopted ‘Other Method’ in its revised TP study report after explaining it in the following manner:- “ASB International has paid ... same are ostensibly are not applicable which has 7 M/s. ASB International P. Ltd. been admitted by both the parties. Even the TNMM also as agreed by both the parties under these facts are also not applicable because TNMM is one sided method which makes it difficult to apply

Oetiker India P.Ltd, Mumbai vs. DCIT 13(1)(1), Mumbai

ITA 2019/MUM/2016[2011-12]Status: DisposedITAT Mumbai25 Aug 2023AY 2011-12

For Appellant: Shri Ketan VedFor Respondent: Shri Samuel Pitta

Section 143(3)Section 144C(13)Section 144C(5)Section 92C

challenged the approach adopted by TPO/DRP of aggregating the manufacturing and trading segments and determining the ALP by benchmarking the transactions by applying the TNMM at the entity level. He submitted that the functions performed by the Appellant for trading and manufacturing activities are completely different. The aforesaid two segments

Amadeus India Pvt. Ltd., New Delhi vs. DCIT, Circle-1(1), New Delhi

In the result, assessee’s appeal stands partly allowed as above

ITA 468/DEL/2022[2017-18]Status: DisposedITAT Delhi24 Aug 2023AY 2017-18

Bench: SHRI SHAMIM YAHYA (Accountant Member), SHRI CHALLA NAGENDRA PRASAD (Judicial Member)

For Appellant: Shri Tarandeep Singh, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR

Section 14ASection 92BSection 92C(3)Section 92F

show that for excessive AMP expenditure it was compensated by the AE through a set-off. (x) Margins earned by the appellant (applying TNMM) is not significantly more than the margins of the comparable companies. 5. Without prejudice, that on facts and in law the AO/TPO/DRP erred in not appreciating ... Processing and Subsidiary Distribution Activities of the assessee have 5 ITA No.468/Del./2022 been held to be at Arm’s Length Price (ALP) applying TNMM by the TPO. 4. Apropos issue of AMP Adjustment : As noted above, TPO has accepted the benchmarking of declared international transactions, however

Honda Motorcycle and Scooter India Pvt. Ltd., Gurgaon vs. ACIT, Circle-1(1), Gurugram

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

ITA 1523/DEL/2022[2017-18]Status: DisposedITAT Delhi22 Aug 2023AY 2017-18

Bench: SHRI SHAMIM YAHYA (Accountant Member), SHRI CHALLA NAGENDRA PRASAD (Judicial Member)

For Appellant: Shri Harpreet Singh Ajmani, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR

Section 143(3)Section 92C

basis thereof. 5. The TPO/DRP erred in rejecting the 'combined transaction approach' adopted by the Assessee for benchmarking its operating profitability using the TNMM method. 6. That without prejudice, the TPO/DRP erred in applying the CUP method and the "benefit test" for determining the ALP of the transactions ... exports. The assessee in its 10 ITA No.1523/Del./2022 TP study had benchmarked the transactions related to Export Commission taking combined transaction approach using TNMM. The TPO rejected this approach without any basis and selected two transactions and decided to benchmark them separately using CUP method. On such payment

Sara Logistics Services P.Ltd, Mumbai vs. ITO 8(3)(1), Mumbai

ITA 97/MUM/2017[2011-12]Status: DisposedITAT Mumbai21 Aug 2023AY 2011-12

For Appellant: Ms. Arti N. ShahFor Respondent: Shri Samuel Pitta

Section 143(2)Section 143(3)

processing services to its AES on cost plus basis and therefore, operating profit(OP) / Value Added Expenses (VAE) ratio is the appropriate PLI under TNMM method as against OP/OC as adopted by the said CIT(A) and also ignored the fact that the OP/VAE of appellant is 30.70% as given ... using Comparable Uncontrolled Price (CUP) method, whereas in the Transfer Pricing Study Report (TPSR), the most appropriate method used was Transaction Net Margin Method (TNMM). The Appellant had used Operating Profit/Value Added Expenses (OP/VAE) as the Profit Level Indicator (PLI). The Appellant had selected a set of five comparable companies

Skf India Ltd, Mumbai vs. DCIT 4(3)(2), Mumbai

Appeal is partly allowed

ITA 1746/MUM/2017[2012-13]Status: DisposedITAT Mumbai21 Aug 2023AY 2012-13

For Appellant: Ms. Sailee V. GujarathiFor Respondent: Shri Gaurav Batham

Section 143(3)Section 144C(13)Section 144C(5)Section 145A

transactions are to be aggregated for determination of ALP and would be covered under the overall profit margin worked out under the TNMM. As discussed in earlier part of our order, the intra-group services were stated to be inextricably linked with the manufacturing segment and hence it has been ... aggregated with the overall business activities. If it is found that all the transactions are to be aggregated then definitely under the TNMM and given the high profit margin of 13 the assessee, no separate benchmarking would be required qua the intra-group services. In case, if it is found

Lord India P.Ltd, Mumbai vs. Asst RG 10(2)(1), Mumbai

In the result, appeal of the assessee is allowed

ITA 1038/MUM/2017[2012-13]Status: DisposedITAT Mumbai21 Aug 2023AY 2012-13

Section 143(3)

Transactiona Operating 33.86% 6.58% material l Net Margin profit (Manufacturing Method ('OP')/ segment) (TNMM1) Sales Purchase of 3,29,59,060 TNMM OP/ Sales 55.52% 1 .54% finished goods (Trading segment) Sales of finished 26,865 Comparable NA Price charged by Lord India to goods Uncontrolled ... been assets purchased from the AE at the same price at which the AE has purchased from third parties. Rendering of 38,95,448 TNMM OP/ Total 17.11% -4.47% services Cost (Service segment) Payment of 2,42,74,546 TNMM OP/ Sales Aggregated with the royalty international transactions of Availing

Thermax Babcock & Wilcox Energy Solutions P.Ltd, Mumbai vs. DCIT Cir 2(3)(1), Mumbai

In the result, appeal filed by the assessee is partly allowed as indicated above

ITA 1735/MUM/2016[2011-12]Status: DisposedITAT Mumbai18 Aug 2023AY 2011-12

Appellant has not been able to establish benefit test and willingness to pay test. Further, the DRP has also held that the corroboration using TNMM method cannot be accepted, in absence of other tests being satisfied in respect of intra group services. It has noted that the Appellant ... Further, Ld DRP after considering the remand report, rejected the same by observing that it fails benefit and willingness test and also rejected the TNMM method for not considering the other methods. 32. After considering the various submissions, we are of the view that both groups formed a joint venture