Under the transactional net margin method, turnover disparity...

Under the transactional net margin method, turnover disparity alone does not justify excluding a functionally comparable entity; material impact or reasonably accurate comparability adjustments must be examined, and arm's-length-price adjustments must be confined to associated-enterprise transactions. Goodwill amortisation that is abnormal and non-recurring, and costs unrelated to associated-enterprise transactions, are excluded from operating costs. Import-duty adjustments and warranty, replacement and bad-debt deductions were accepted on consistent treatment, while verification-dependent provision reversals, write-backs and working-capital adjustments require factual examination. Long-term benefit alone does not make business-rights expenditure capital, and an appellate authority may admit a fresh deduction claim for verification. Depreciation on capitalised software expenditure was allowed.