Transfer Pricing Comparables Revisited

The Delhi High Court has revisited the principles governing selection of comparables in transfer pricing assessments involving Information Technology Enabled Services (ITeS). 

The Court held that functional comparability and turnover parity remain critical components of a valid benchmarking exercise. While remanding the issue concerning the comparability of Cepha Imaging Pvt. Ltd. for a fresh examination of its functional profile, the Court simultaneously held that CG Vak Software & Exports Ltd. could not be treated as a valid comparable owing to the enormous disparity in turnover vis-à-vis the assessee. 

The decision underscores that transfer pricing analysis must be grounded in economic realities rather than a purely mechanical application of filters.