Simultaneous Application Of Two Methods For Benchmarking An International Transaction Is Not Permitted In India TP Regulations

Facts of the case

Mori Seiki Co. Ltd. ["the taxpayer"/ "the HO"], operating as a Branch office of Mori Seiki- Japan in India ["India BO"], is primarily engaged in selling machine tools manufactured by the HO in India. During the assessment year under review, the taxpayer provided marketing, sales, post sales, technical and consumer support services to the dealer network of its associated enterprise ["AE/ the HO"] and benchmarked the same by applying Transactional Net Margin Method ["TNMM"].

During assessment proceedings, the assessment officer ["AO"], by relying the terms of the agreement between the HO and its India BO held that the India BO is not only involved in selling of machines manufactured by the HO in India but also participates in determination of price of machines with the HO and thus, is exposed certain crucial business risks. Based on functional, assets and risk ["FAR"] analysis of the India BO and, the AO concluded that the taxpayer constituted a