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Under the transactional net margin method, turnover disparity...
Transfer-pricing comparability requires material turnover effects; adjustments must cover only associated-enterprise transactions and exclude abnormal operating costs.
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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.
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.
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