Category Archives: Other Sources

How effective is TNMM method in Transfer pricing?

TNMM is the easiest, popular and widely used method for fixation of arm’s length pricing because of two databases available both with assessee and TPO but the assessee should hear the warning bells before squaring on this method. These databases have certain limitations in terms of reliability and accuracy of data. For certain services the databases do not provide substantial information about comparable companies. TNMM has become most popular method with TPO's for rejection because of the common platform as TPO is able to provide his own set of comparable without any search process. TPO’s often hold the following position:
• Rejection of Loss Making Companies
• Rejection of Companies having only domestic transactions
• Rejection of Multiple year data

If the assessee has a strong documentation and good economic analysis, it would become a challenging task for the TPO to prove otherwise.

Post No. - 24

Section 69A Gift documentation- Unexplained/unrecorded moneys etc.

The Delhi High Court in Ashok Mahindru & Sons (HUF) v. CIT (2008) 173TAX178 held that even though the documentation may be in order, if there is enough material to raise a very strong suspicion that there is something not quite right with the nature of the transaction, the authorities under the Act may reject the documents and require the assessee to show that the transaction is really one which is above board. In this case the assessee had claimed to have received a gift of significant sums of moneys from a Swiss national but for the reason that it failed to provide adequate material to show the resources or finances of the Swiss national such sums were taken as unexplained moneys in his hand