Capacity-utilisation adjustments under TNMM can neutralise substantiated COVID-related idle costs where underutilisation materially affects profitability.

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....Rule 10B(3) permits reasonably accurate comparability adjustments under TNMM to neutralise material differences affecting profitability; it does not require mathematical precision or publicly available identical capacity-utilisation data for comparables. Extraordinary COVID-19-related underutilisation of a captive service provider's manpower and infrastructure can create abnormal idle costs because fixed employee and infrastructure costs are spread over reduced activity. Where the taxpayer substantiates those costs and their computation, and they are not shown to be non-genuine, non-business-related or incorrect, the costs should be neutralised in determining the arm's length margin. The resulting adjusted margin may establish that the international transaction is at arm's length.....