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.