Transfer pricing remand scope: exceeding remand directions in recomputing profit margin did not raise a substantial question of law.

The Tribunal's remand in transfer pricing proceedings was confined to fresh determination of arm's length price through internal comparison of profitability between associated-enterprise and unrelated-party transactions, after proper allocation of revenues and expenses to each segment. The Transfer Pricing Officer exceeded those directions by recomputing the net profit margin on an incorrect basis, substituting actual costs in the unrelated-party segment at the related-party segment level. The Delhi HC found no error in the Tribunal's treatment of that overreach and held that no substantial question of law arose, so the challenge to the Tribunal's order failed.

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Issues: Whether the Tribunal's order in transfer pricing proceedings gave rise to any substantial question of law, where the Assessing Officer/Transfer Pricing Officer had proceeded beyond the scope of the remand directions while recomputing the net profit margin.

Analysis: The Tribunal's earlier remand required fresh adjudication confined to determining the arm's length price by making internal comparison of profitability between international transactions with associated enterprises and transactions with unrelated parties, after allocating revenues and expenses to the respective segments. The record showed that the Transfer Pricing Officer went beyond those directions and recomputed the net profit margin by substituting actual costs in the unrelated-party segment at the level of the related-party segment. In these circumstances, no error was shown in the Tribunal's approach.

Conclusion: No substantial question of law arose and the challenge to the Tribunal's order failed.

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