Delhi HC upholds Transactional Net Margin Method as Appropriate Method for Calculating Arm’s Length Price Over TPO’s Alternative Method

The Delhi High Court has upheld the Transactional Net Margin Method (TNMM) as the appropriate method for calculating the arm’s length price in a transfer pricing dispute. The case involved a taxpayer who challenged the Transfer Pricing Officer’s (TPO) alternative method for determining the arm’s length price. The court found that the TNMM, which compares the net profit margin of a controlled transaction to that of comparable uncontrolled transactions, was more suitable for the case. The judgment emphasized the importance of selecting the most appropriate transfer pricing method to ensure fair and accurate assessments. This ruling provides clarity on the application of transfer pricing methods and supports the use of TNMM in similar cases.