India: “At-cost” transfer pricing model upheld for provision of technical services in oil and gas operations (tribunal decision)
Mumbai Bench of the Income-tax Appellate Tribunal
The Mumbai Bench of the Income-tax Appellate Tribunal upheld a taxpayer's “at-cost” transfer pricing model for providing technical services related to oil and gas operations. The tribunal considered the consortium framework related to upstream oil and gas sector operating under production sharing contracts (PSCs), which often restrict profit margins on such services, and an independent expert opinion supporting the model's compliance with the arm's length principle.
The tribunal noted that evidence, including sample PSCs, showed the “at-cost” model as an industry norm, meeting the “other method” requirement under Rule 10AB of the Income-tax Rules, 1962.
For other international transactions, the tribunal remanded the case to the Transfer Pricing Officer for new analysis, directing the use of contemporaneous data and proper examination of cost allocation documentation.
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