Multinational Firms Win Transfer Pricing Battle: TNMM Method Validated, Interconnected Transactions Recognized as Single Economic Unit

ITAT adjudicated a transfer pricing dispute involving international transactions. The tribunal found that tax authorities erroneously rejected the Transactional Net Margin Method (TNMM) for determining arm's length pricing. The ITAT held that the disputed transactions were intrinsically linked and should be aggregated, with the assessee's calculated margins of 16.99% being acceptable. The tribunal criticized the tax authorities for arbitrarily segregating transactions without substantive evidence or comparability tests. The decision affirmed that interconnected transactions related to a single product line can be evaluated holistically. Consequently, the ITAT ruled in favor of the assessee, setting aside the transfer pricing adjustments and rejecting the tax department's separate transaction assessment approach. .....

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