Pawan Ltd. of Mumbai is engaged in trading of electronic goods. It purchased 3000 units of electronic goods from its associated enterprises, Wind Ltd., Singapore @ ₹2,900 per unit and sold these units to Raja Enterprises

Best Method for Arm's Length Price (ALP) Calculation: Given that Pawan Ltd. purchased similar electronic goods from an unrelated party (Varsha Ltd.) and sold them at a gross profit margin, the Resale Price Method (RPM) appears to be the most appropriate method for determining the Arm's Length Price in this circumstance. The RPM compares the resale price of a product purchased from an associated enterprise to the resale price of a similar product purchased from an unrelated enterprise, after adjusting for gross profit margin. Computation of Arm's Length Price (ALP) using Resale Price Method: Particulars Amount (₹ per unit) Resale price of goods purchased from Wind Ltd. (Sold to Raja Enterprises) 3,300 Less: Normal Gross profit margin @ 20% on sales (3,300 * 20%) (660) Gross Profit (Arm's Length) 2,640 Add: Adjustment for Brand Value (Benefit of Wind Ltd.'s brand value) 50 Less: Quantity discount allowed by Wind Ltd. (20) Arm's Length Price (ALP) 2,670 Computation of Addition to Income of Pawan Ltd.: Particulars Amount (₹) Price paid to Wind Ltd. (3000 units * ₹2,900 per unit) 87,00,000 Arm's Length Price of transaction (3000 units * ₹2,670 per unit) 80,10,000 Increase in Income of Pawan Ltd. (Addition required) 6,90,000 Conclusion: An addition of ₹6,90,000 needs to be made to the total income of Pawan Ltd. as the price paid to its associated enterprise (Wind Ltd.) was higher than the Arm's Length Price determined using the Resale Price Method, after making appropriate adjustments for brand value and quantity discount.