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(b) resale price method;

(c) cost plus method;

(d) profit split method;

(e) transactional net margin method;

(f) such other method as may be prescribed by the Board. (2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm's length price, in the manner as may be prescribed:

Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices:

64. Section 92C(1) is of significance and relevance as it stipulates that arm's length price in relation to an international transaction can be determined by any of the five methods stipulated therein, with authority to the Board to prescribe a sixth method. It is an accepted case that the Board has prescribed such method in Rule 10AB with effect from 1st April, 2012. The five methods are (a) Comparable Uncontrolled Price Method; (b) RP Method, i.e. Resale Price Method; (c) CP Method, i.e. Cost Plus Method; (d) Profit Split Method; and, (e) TNM Method, i.e. Transactional Net Margin Method. Sub-sections (1) and (2) to Section 92C casts obligation on the assessed to compute arm's length price as per the methods prescribed. Consequently, the burden is on the assessed to select and justify the method adopted and the arm's length price declared. Under sub-section (3) to Section 92C, the Assessing Officer can proceed to determine the arm's length price in accordance with Section 92C(1) and (2) on the basis of material, information or documents in his possession, if any of the circumstances mentioned in clauses (a) to (d) are satisfied. The circumstances being: the price paid or charged for an international transaction has not been determined in accordance with sub-sections (1) and (2); information or documents relating to an international transaction has not been kept or maintained in accordance with the provisions of Section 92D(1) or the Rules; information or data used in computation or arm's length price is not reliable or correct; or the assessed has failed to furnish, within stipulated time, information or document required to be furnished as per notice under sub-section (3) to Section 92D. (See judgment dated 16th December, 2013 in ITA No. 306/2012 titled Li & Fung India Pvt. Ltd. vs. Commissioner of Income Tax of the Delhi High Court).

66. TNM Method or Profit Split Method are called transactional profit methods or profit based methods. United Nations' Practical Manual on Transfer Pricing in paragraph 1.5.10 observes that there is growing acceptance of practical importance of profits based methods. TNM Method has been elucidated in detail below. Profit Split Method takes the combined profit earned by two related parties from one or series of transactions and then divides those profits using economically valid defined basis and aims on replicating the division of profits which would have been anticipated in an agreement made at arm's length. It requires working back from the profit to the price.

81. Similarly, sub-rule (3) to Rule 10B refers to transactions being compared or comparison of the enterprises entering into such transactions likely to affect the price or cost charged etc. A reading of Rule 10C reassures and affirms that the general principle of plurality is not abandoned or discarded.

82. There is considerable tax literature and text that CUP Method, i.e. Comparable Uncontrolled Price Method, RP Method, i.e. Resale Price Method and CP Method, i.e. Cost Plus Method can be applied to a transaction or closely linked, or continuous transactions. Profits Split Method and TNM Method grouped as ‗transactional profit methods', can be equally effective and reliable when applied to closely linked or continuous transactions. Thus, it would be inappropriate to proceed with the arm's length computation methods, with a pre-conceived suppositions on singularity as a statutory mandate. Clubbing of closely linked, which would include continuous transactions, may be permissible and not ostracized. Aggregation of closely linked transactions or segregation by the assessed should be tested by the Assessing Officer/TPO on the benchmark and the exemplar; whether such aggregation/ segregation by the assessed should be interfered in terms of the four clauses stipulated in Section 92C(3) of the Act, read with the Rules. It would, among other aspects, refer to the method adopted and whether reliability and authenticity of the arm's length determination is affected or corrupted.