Section 92C(1) of the Income Tax Act

Transfer pricing adjustments must be restricted to international transactions with associated enterprises and cannot be made at the entity level or in respect of transactions with unrelated parties.

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.

Expenses incurred during the pre-commencement period of a business are not deductible as business expenses or losses, although such expenses may be eligible for depreciation if they can be capitalized to assets. The interpretation of 'used for the purposes of the business' regarding machinery, plant, or buildings, and whether it includes passive as well as active user, was left open.

Outstanding invoices with a foreign associated enterprise are considered international transactions under Explanation to section 92B, and transfer pricing provisions apply as anti-abuse measures, overriding general provisions. Notional interest income can be brought to tax based on the arm's length principle, even if it involves assumptions.

Working capital adjustment is permissible in transfer pricing, and the calculation of such adjustment should consider factors like the SBI PLR or base rate.

A prima facie opinion by the Assessing Officer is sufficient to make a reference to the Transfer Pricing Officer. The Assessing Officer is not required to form a considered opinion after examining all materials before making a reference.

The cost base for applying the operating profit over total cost margin in transfer pricing cannot be broadened to include costs not incurred by the assessee. Tax authorities cannot impute costs incurred by third parties or associated enterprises for computing the assessee's net profit margin.

The Transfer Pricing Officer (TPO) cannot make adjustments to the entire segment of manufacturing activity. Adjustments can only be made to the extent of international transactions and only to the extent of arm's length price.

A company is considered a comparable in transfer pricing analysis unless it is shown to be functionally incomparable.

A transfer pricing adjustment is inappropriate where the Transfer Pricing Officer (TPO) fails to identify a comparable transaction to determine the Arm's Length Price (ALP).