Transfer-pricing methods, loss set-off and secondary-adjustment rules govern assessment computation, valuation and associated-enterprise refund eligibility.
Timely issuance of a draft assessment order attracts the separate final-order timelines prescribed for DRP directions, notwithstanding the general assessment limitation. Tax computation must conform to assessed nil income after set-off of brought-forward losses and unabsorbed depreciation, subject to verification of year-wise utilisation. For traded goods purchased from associated enterprises and resold independently, RPM remains appropriate absent material processing, substantial value addition, or defects in gross-margin comparables; a comparable with verifiable gross-profit data cannot be rejected solely under TNMM profitability criteria. A commercially justified weighted NAV-DCF valuation may determine the arm's length price of an operating-business transfer where neither NAV nor DCF should receive exclusive weight. A transaction deemed international does not alone establish associated-enterprise status for secondary adjustment; refund eligibility requires verification of that relationship.
Issues: (i) Whether the final assessment order was barred by limitation after timely issuance of the draft assessment order; (ii) Whether the tax computation was required to give effect to set-off of brought-forward losses and unabsorbed depreciation; (iii) Whether the Resale Price Method was the most appropriate method for benchmarking purchases of traded goods and whether Power2SME Pvt. Ltd. was to be considered as a comparable; (iv) Whether the arm's length price for transfer of the Flexographic Packaging Division was to be determined by NAV alone, DCF alone, or weighted NAV-DCF valuation; (v) Whether additional income-tax paid on a secondary adjustment was refundable where the transferee was asserted not to be an associated enterprise.
Issue (i): Whether the final assessment order was barred by limitation after timely issuance of the draft assessment order.
Analysis: The retrospective insertion of Section 153(10) and Section 144C(13A) by the Finance Act, 2026 clarifies that, where a draft assessment order is forwarded within the limitation under Section 153, the subsequent final order pursuant to DRP directions is governed by the timelines under Section 144C(12) and Section 144C(13). The draft order was issued within the asserted limitation period. The constitutional validity of the retrospective amendments was outside the Tribunal's jurisdiction.
Conclusion: The final assessment order was not time-barred; the limitation challenge fails against the assessee.
Issue (ii): Whether the tax computation was required to give effect to set-off of brought-forward losses and unabsorbed depreciation.
Analysis: The assessment order determined total income at nil after allowing set-off, whereas the attached computation proceeded on pre-set-off income and raised a demand. A computation sheet forming part of the assessment proceedings cannot contradict the assessed income in the assessment order. Year-wise availability and utilisation of losses and unabsorbed depreciation require arithmetical verification to prevent double allowance.
Conclusion: Set-off must be given effect to and the tax liability and demand recomputed after verification, in favour of the assessee.
Issue (iii): Whether the Resale Price Method was the most appropriate method for benchmarking purchases of traded goods and whether Power2SME Pvt. Ltd. was to be considered as a comparable.
Analysis: Rule 10B(1)(b) recognises RPM for goods acquired from an associated enterprise and resold to independent customers. Normal distribution functions and ordinary market, inventory and credit risks do not by themselves make RPM unreliable; material processing or substantial value addition is required to displace gross-margin comparison. No material processing or specific defect in the comparable gross-margin data was established. Earlier use of TNMM and settlement of prior disputes did not preclude RPM for the relevant transaction. A comparable cannot be excluded solely by applying an operating-profit or loss criterion relevant to TNMM where reliable gross-profit data exists, though functional comparability and data reliability remain mandatory.
Conclusion: RPM is the most appropriate method. The ALP shall be recomputed under RPM, with Power2SME Pvt. Ltd. included if its gross-profit data is verifiable and no independent functional infirmity is shown; the TNMM adjustment does not survive, in favour of the assessee.
Issue (iv): Whether the arm's length price for transfer of the Flexographic Packaging Division was to be determined by NAV alone, DCF alone, or weighted NAV-DCF valuation.
Analysis: Section 92C(1)(f) read with Rule 10AB permits an other method that considers all relevant facts, and does not prohibit a commercially justified combination of recognised valuation approaches. NAV alone could not disregard the future earning capacity of an operating business, particularly when the assessee's own valuation used a DCF component. Conversely, no material defect justified assigning zero weight to NAV and adopting DCF alone. The independent weighted NAV-DCF valuation was supported by the record and no sufficient defect in it was established.
Conclusion: The weighted NAV-DCF value is accepted; the further transfer-pricing adjustment is deleted, while the voluntary primary adjustment based on that weighted value remains undisturbed, partly in favour of the assessee.
Issue (v): Whether additional income-tax paid on a secondary adjustment was refundable where the transferee was asserted not to be an associated enterprise.
Analysis: Section 92B(2) may deem a transaction with a non-associated enterprise to be an international transaction for specified purposes, but Section 92CE applies where excess money remains with an associated enterprise, as defined by Section 92A through Section 92CE(3)(i). The deeming fiction cannot be enlarged beyond its statutory purpose. The record contained no categorical finding identifying the clause under which the transferee qualified as an associated enterprise.
Conclusion: A transaction deemed international solely under Section 92B(2) does not itself establish associated-enterprise status for Section 92CE; the associated-enterprise status and consequential refund claim must be determined after verification, in favour of the assessee on the legal issue.
Final Conclusion: The assessment computation must reflect the allowable loss set-off; the traded-goods ALP must be freshly determined under RPM; the additional FPD adjustment is removed while the voluntary adjustment is retained; and the secondary-adjustment refund claim requires factual verification of the associated-enterprise relationship.