Arm's length pricing method dispute over related-party purchases was remanded for fresh examination of the appropriate transfer pricing method.

The arm's length price for purchases from associated enterprises turned on whether the Comparable Uncontrolled Price method could be applied on the existing invoices and back-to-back invoices, or whether the Transactional Net Margin Method was more appropriate. The record did not contain sufficient financial detail to show conclusively whether the associated enterprise had derived any benefit or mark-up over the vendor price, so the method selection could not be finally determined on the available material. The matter was restored to the Assessing Officer for fresh examination of whether any benefit or mark-up existed and for redetermination of the appropriate method; the assessee's remaining grounds were left open as premature.

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Issues: Whether the Comparable Uncontrolled Price method or the Transactional Net Margin Method was the most appropriate method for determining the arm's length price in respect of purchases from associated enterprises, and whether the matter required remand for fresh consideration.

Analysis: The assessee relied on purchase invoices and back-to-back invoices to support application of the Comparable Uncontrolled Price method, while the revenue authorities rejected it on the ground that the material did not establish absence of any benefit or mark-up at the level of the associated enterprise. As the record did not contain full financial details to conclusively show whether the associated enterprise had derived any benefit or mark-up on the vendor price, the correctness of the method selection could not be decided on the existing material. The issue was therefore restored to the Assessing Officer for examining whether the associated enterprise had derived any benefit or mark-up and for fresh determination of the appropriate method.

Conclusion: The selection of the most appropriate method was remanded to the Assessing Officer for fresh consideration, and the assessee's other grounds were left open as premature.

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