The Mumbai Income Tax Appellate Tribunal has recently ruled on whether the use of the comparable uncontrolled price (CUP) method or the transactional net margin method (TNMM) is better in regard to software services.
The case involved an Indian subsidiary that provided software services to its U.S parent company. In determining the appropriate transfer price, the subsidiary chose the CUP method comparing to the hourly rate charged by major Indian software companies. They then made adjustment…