Transfer Pricing Methods CUP vs. TNMM & Weighted Average Arithmetic Mean & Rule 10B Adjustments

RBS Equities (India) Ltd vs. ACIT (ITAT Mumbai)

(i) For comparability analysis, the Comparable Uncontrolled Method (CUP) is better than the TNMM, especially if internal CUP instances are available; (ii) the assessee’s argument that "weighted average arithmetic mean" of brokerage rates as compared to the "simple average arithmetic mean" of such rates should be adopted is not acceptable because the First Proviso to s. 92C refers only to "arithmetic mean" of more than one ALP and does not require the volume of the relevant transactions to be taken into consideration; (iii) under Rule 10B(1)(a)(ii) adjustments to account for difference, if any, between the international transaction and the comparable uncontrolled transaction which could materially affect the price in the open market have to be made. However, the onus is on the assessee to make out a case for such adjustment (on account of differences in marketing function, research functions and differences in volumes) supported by relevant facts & figures & documentary evidence