Transfer pricing for development centres: TNMM with cost plus for low risk contract R&D; PSM cautioned due to data issues. The Committee recommends that low risk captive Development Centres satisfying cumulative FAR criteria be benchmarked by the Transactional Net Margin Method with an appropriate cost plus mark up, while Profit Split Method should be reserved for exceptional cost sharing or integrally linked intangible cases and used with extreme caution due to data and attribution difficulties. It urges updated CBDT guidance on FAR analysis, issuance of circulars to ensure uniform TP administration, and a set of sectoral clarifications: giving effect to deeming of 'on site' exports, recognising DTM when connected to software development, privileging SoW over MSA for scope, treating R&D as eligible under export notifications, and preserving tax holidays on slump sales and SEZ relocations subject to fact based tests.
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Transfer pricing for development centres: TNMM with cost plus for low risk contract R&D; PSM cautioned due to data issues.
The Committee recommends that low risk captive Development Centres satisfying cumulative FAR criteria be benchmarked by the Transactional Net Margin Method with an appropriate cost plus mark up, while Profit Split Method should be reserved for exceptional cost sharing or integrally linked intangible cases and used with extreme caution due to data and attribution difficulties. It urges updated CBDT guidance on FAR analysis, issuance of circulars to ensure uniform TP administration, and a set of sectoral clarifications: giving effect to deeming of "on site" exports, recognising DTM when connected to software development, privileging SoW over MSA for scope, treating R&D as eligible under export notifications, and preserving tax holidays on slump sales and SEZ relocations subject to fact based tests.
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