Transfer Pricing TNMM must be applied to transaction margins and not to enterprise level margins. Adjustments must be confined to international transactions

DCIT Vs. M/s Starlite (ITAT Mumbai) The assessee, engaged in the business of manufacture and export of diamonds and jewellery, claimed that having regard to the nature of the product, none of the transfer pricing methods were applicable for bench marking the international transactions with associated enterprises. The TPO rejected the argument on the ground that the Transactional Net Margin Method (TNMM) was applicable and made an adjustment by comparing the enterprise level operating margins. This was upheld in principle by the CIT(A). On appeal to the Tribunal, HELD: (i) It is mandatory fo...