Resale Price Method affirmed where imported goods are resold without value addition, displacing TNMM as inappropriate.

Where an Indian enterprise merely resells goods acquired from associated enterprises without meaningful value addition, the appropriate transfer pricing prescription is to apply the Resale Price Method (RPM) rather than the Transactional Net Margin Method (TNMM); the determinative benchmark is the gross margin on resale after cost of sale, and absence of comparables supporting TNMM justifies its rejection, yielding the operative effect that the Tribunal's choice of RPM was correct and the legal question resolved against the revenue and in favour of the assessee.

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Issues: (i) Whether the Tribunal misdirected itself on facts and in law in rejecting the Transactional Net Margin Method (TNMM) used by the Transfer Pricing Officer for ascertaining the arm's length price (ALP)?

Analysis: The Tribunal found on facts that the assessee resold imported goods in the market without making any value addition and that no comparable instances supporting TNMM were placed on record by the TPO or DRP. The factual findings included that the assessee's activity was that of a pure reseller/distributor and that the determinative factor for benchmarking was the gross margin earned on resale after cost of sale. The Court considered precedents of this Court and tribunals which establish that where goods purchased from associated enterprises are resold as such without significant value addition, the Resale Price Method (RPM) is ordinarily the most appropriate method under the transfer pricing framework. Applying these legal principles to the Tribunal's factual findings, the Court held that RPM, and not TNMM, was the most appropriate method to determine ALP in the present cases.

Conclusion: The Tribunal did not misdirect itself; TNMM was rightly rejected and RPM is the most appropriate method on the facts. The question of law is answered against the appellant/revenue and in favour of the respondent/assessee.

Ratio Decidendi: Where an Indian enterprise merely resells goods imported from associated enterprises without making value addition, the Resale Price Method is the most appropriate method to determine the arm's length price.

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