Extended Background

Indian marketing support services and commodity groups, like SABIC, rely heavily on previously accepted benchmarking approaches. As scrutiny increased, authorities tried shifting methods without material changes to business facts. This case clarified that stable, justifiable methods are a compliance right.

Detailed Arguments

Taxpayer

• Defended the consistent use of the same benchmarking method (usually TNMM), supported by multi-year evidence.

Revenue

• Argued new methods were “better” for revenue, seeking higher local profits.

Court Reasoning

• Rejected leaps in benchmarking without factual change, safeguarding reliance on accepted norms barring true business evolution.

Procedural Journey

• Dispute escalated to the High Court, which voided the assessment and restored the established method.

Implications Beyond the Case

• Security for MNEs: as long as the business is stable, benchmarking methodology is protected from arbitrary shifts.

Original Case Link:

Tax Risk Management SABIC case