Transfer pricing benchmarking must reflect the assessee's true functional profile before comparables are selected or rejected.

The assessee was characterised as providing sales and marketing support services in the nature of coordination support, not as an advertisement and marketing agency. Because that functional profile was central to benchmarking, the transfer pricing adjustment and the selection and rejection of comparables could not be conclusively sustained on the existing analysis. The ITAT therefore remanded the transfer pricing issue and connected grounds to the Transfer Pricing Officer and Assessing Officer for fresh consideration, with a proper opportunity of hearing to the assessee in line with natural justice. The appeal was partly allowed for statistical purposes.

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Issues: Whether the transfer pricing adjustment and the selection/rejection of comparables were sustainable in view of the assessee's correct functional profile, and whether the matter required remand to the Transfer Pricing Officer / Assessing Officer.

Analysis: The assessee's profile was found to be one of sales and marketing support services in the nature of coordination support, and not an advertisement and marketing agency. The existing comparability exercise had not properly taken this profile into account. Since the characterization of the assessee was central to the benchmarking exercise, the comparable selection and related transfer pricing issues could not be finally adjudicated without re-examination by the Transfer Pricing Officer / Assessing Officer. The assessee was also to be afforded a proper opportunity of hearing in accordance with natural justice.

Conclusion: The transfer pricing issue and all connected grounds were remanded for fresh consideration, and the appeal was partly allowed for statistical purposes.

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