Transfer Pricing: ITAT Rejects Isolated Interest Benchmarking, Upholds TNMM Principle and Prevents Double Taxation

ITAT allowed the assessee's appeal, finding merit in their arguments regarding transfer pricing methodology. The tribunal held that benchmarking interest on receivables in isolation violates the TNMM principle of aggregation and would result in double taxation. No evidence suggested undue benefit to associated enterprises through differential credit terms. The working capital adjustment already neutralizes potential impact of delayed receivables. Consequently, the notional interest adjustment was deleted, and consequential penalty proceedings under section 270A were also set aside, affirming the assessee's transfer pricing approach as consistent with established principles. .....

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