Tide Ltd., an assessee, has sold goods on 12.01.2026 to Limitless Ltd., located in notified jurisdictional area (NJA), for 9.50 crores. During the…

A transaction where one of the parties thereto is a person located in a NJA would be deemed to be an international transaction and all parties to the transaction would be deemed as associated enterprises. Accordingly, all the provisions of transfer pricing would be attracted in case of such a transaction. Hence, the transactions between Tide Ltd, an Indian company and Limitless Ltd., located in NJA, would be deemed to be international transactions between associated enterprises. The transactions of Tide Ltd. with XY Inc. of Country X and RP Inc. of Country Y for sale of identical goods are comparable uncontrolled international transactions, since they are neither associated enterprises of Tide Ltd. nor are they situated in NJA. Hence, Comparable Uncontrolled Price (CUP) method can be used to determine ALP. Where more than one price is determined by the most appropriate method, CUP method in this case, then, the arithmetic mean has to be taken in cases where the number of entries in the dataset is less than 6 (in this case it is only 2). Moreover, the benefit of permissible variation between the ALP and the transfer price based on the rate notified by the Central Government (i.e., maximum of 3% of transaction price) would not be available in respect of such transaction. Computation of ALP using CUP method Particulars XY Inc. ₹ in crores RP Inc. ₹ in crores Price charged by Tide Ltd. (on CIF basis) 10.50 11.00 Less: Ocean freight and insurance, has to be reduced since the price charged to Limitless Ltd. is on FOB basis 0.18 0.18 10.32 10.82 Less: Cost of after-sales support service (has to be reduced, since such services are being provided to XY Inc. and RP Inc. but not to Limitless Ltd.) 0.13 0.13 Arm's Length Price 10.19 10.69 Arithmetic mean of the above prices [(₹ 10.19 crores +10.69 crores)/2] = 10.44 crores Less: Price at which goods were sold to Limitless Ltd. = 9.50 crores Arm's length adjustment [increase in profit of Tide Ltd.] = 0.94 crores