The Bombay High Court is set to determine if TNMM bench markings can apply to determine Arms Length Price (ALP) at the entity level regarding combined transactions. The hearing allowed the department to raise additional legal questions.
Bombay HC to Decide on TNMM Bench Markings for ALP at Entity Level
The Bombay High Court has scheduled further hearings regarding the applicability of the Transactional Net Margin Method (TNMM) bench markings in establishing the Arms Length Price (ALP) at the entity level for combined transactions. The court has also granted the appellant department the opportunity to introduce additional questions of law during the proceedings.
This case is significant within the context of transfer pricing practices, where establishing the ALP is critical for compliance with Section 92 of the Income Tax Act. The TNMM is one of several methods permitted for determining ALP, and its applicability when dealing with combined transactions may set an important precedent.
The implications of this case extend to how taxpayers and their advisors approach the determination of ALP in situations involving multiple transactions. A ruling favorable to the appellants may encourage compliance with TNMM requirements or prompt further scrutiny by tax authorities in similar instances.
Citations
- Yet to be determined
