Comparable Uncontrolled Prices method (CUP):

Definition

In this method, price charged in an uncontrolled deal between comparable entities is recognized and evaluate with the verified entity price to determine the Arm’s Length Principle.

The CUP method offer the finest evidence of ALP. A arm’s length price may arise where:

• Tax payer or another member of the associate group sells the product, in comparable sizes and in the comparable terms to ALP in similar promote markets (internal comparable).
• An ALP party sells the similar product, in similar size of quantity and in the comparable conditions to other arm’s length party in similar markets (an external comparable).
• The taxpayer of the entities buys the similar quantities, in comparable quantities and in the similar terms from the associate parties in the comparable markets (internal comparable).
• An ALP party buys the particular goods, in comparable quantities and in the similar terms from the other arm’s length associate party in similar markets (external comparable).