Royalty benchmarking under TNMM prevails where domestic rates lack reliable comparability for export transactions and technical know-how use.

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Full Text of the Document

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....Royalty paid for technical know-how may be benchmarked under the transactional net margin method where it is intrinsically linked to manufacturing operations and entity-level margins are arm's length. A domestic royalty rate is not automatically a comparable uncontrolled price for export sales without demonstrated comparability of terms, markets, volumes and business conditions. The notes also address the stringent functional comparability required for commission benchmarking, indexation and transfer-expense verification in capital gains, and appellate consideration of an additional industrial-shifting exemption claim. They further cover non-taxability of overseas commission absent an Indian business connection or permanent establishment, and the presumption that investments derive from own funds where such funds exceed investments.....