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(a) Comparable Uncontrolled Price Method (CUPM)

(b) Resale Price Method (RPM)

(c) Cost Plus Method (CPM)

(d) Profit Split Method (PSM)

(e) Transactional Net Margin Method (TNMM)

(f) Such other method as may be prescribed by CBDT

18. The taxpayer is required to compute arm's length price for a transaction(s) using one of the five methods stipulated in the Income Tax Rules. Rule 10C(1) of Income Tax Rules defines the most appropriate method as the method which is best suited to the facts and circumstances of each particular international transaction. As per Rule 10C(2) the most appropriate method has to be selected having regard to number of factors which are enumerated therein. The arm's length price has to be computed by the application of methods mentioned in Section 92C(1) of the I.T. Act.

(a) comparable uncontrolled price method;

(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, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent. of such arithmetical mean.

(v) the sum so arrived at is taken to be an arm's length price in relation to the supply of the property or provisions of services by the enterprise;

(d) profit split method, which may be applicable mainly in international transactions involving transfer of unique intangibles or in multiple international transactions which are so interrelated that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction, by which -

(i) the combined net profit of the associated enterprises arising from the international transaction in which they are engaged, is determined;