Transfer pricing comparability excludes functionally dissimilar entities and those without reliable segmental data.

Comparable companies in transfer pricing may be excluded where they are functionally dissimilar to the tested IT-enabled services provider or where reliable segmental data is unavailable. The Tribunal also treated high brand value and an upscale business profile as relevant comparability factors for some entities, and the HC found these considerations consistent with the governing approach and supported by precedent. On the factual record, especially the finding of functional dissimilarity, the exclusion of the disputed comparables was upheld and the Revenue's challenge failed.

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Issues: Whether the exclusion of certain comparables in determining arm's length price and transfer pricing adjustment was justified.

Analysis: The Tribunal excluded entities which were either functionally dissimilar to the assessee's IT-enabled services business or for which reliable segmental data was unavailable. High brand value and an upscale business profile were also treated as relevant factors in respect of some comparables. The Court found these reasons to be consistent with the governing approach and supported by precedent, and held that the factual findings, particularly on functional dissimilarity, could not be disturbed.

Conclusion: The exclusion of the disputed comparables was upheld and the Revenue's challenge failed.

Ratio Decidendi: A comparable may be excluded in transfer pricing analysis where it is functionally dissimilar to the tested party or where reliable segmental data is unavailable.

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