Summary
- The Profit Split Method (PSM) is a key approach in Indian transfer pricing, focusing on the combined profits of associated enterprises based on their contributions and risks.
- PSM is particularly relevant when both parties make unique contributions or when transactions are highly integrated, contrasting with one-sided methods like TNMM.
- Recent cases, including Star International Movies Ltd. and PepsiCo India Holdings Pvt. Ltd., illustrate the method's acceptance or rejection based on the uniqueness of contributions and proper benchmarking.
- Businesses are advised to identify potential PSM scenarios early and document value creation meticulously to support their allocation methodologies effectively.
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