ITAT reaffirms transaction level TP analysis

The ITAT held that transfer pricing benchmarking must ordinarily be confined to international transactions with associated enterprises and not undertaken at the entity level where reliable segmental data is available. 

The Tribunal further held that functionally dissimilar entities, companies affected by extraordinary events, and enterprises with export revenue below 75% could not be regarded as suitable comparables for an export-oriented garment manufacturer. 

Accordingly, the matter was remanded to the TPO for a fresh benchmarking exercise after applying the appropriate FAR and export filters. The assessee was also held entitled to the benefit of the tolerance band under Section 92C(2).