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Issues: (i) Whether a company following a different accounting year could be included as a comparable for transfer pricing analysis when the relevant figures for the assessee's financial year were not directly available from the audited accounts without adjustment. (ii) Whether, on remand of the comparable-company issue, the entire transfer pricing exercise could be reopened de novo or only the issues actually raised before the first appellate authority and left undecided could be examined.
Issue (i): Whether a company following a different accounting year could be included as a comparable for transfer pricing analysis when the relevant figures for the assessee's financial year were not directly available from the audited accounts without adjustment.
Analysis: For comparability under the transfer pricing rules, the data must relate to the financial year in which the international transaction was entered into. The data of a comparable must therefore correspond to the same financial year as that of the tested party. If the relevant financial-year figures cannot be directly derived from the annual accounts without interpolation, extrapolation, apportionment, or truncation, the company does not qualify for inclusion, even if functionally comparable.
Conclusion: The company could not be included as a comparable unless its financial-year data for the relevant period was directly available and verifiable on the basis of its annual reports.
Issue (ii): Whether, on remand of the comparable-company issue, the entire transfer pricing exercise could be reopened de novo or only the issues actually raised before the first appellate authority and left undecided could be examined.
Analysis: Rule 27 permits the respondent to support the order on grounds decided against it, but it does not justify setting aside the entire assessment for a fresh de novo determination. Where the first appellate authority has omitted to decide some issues because relief was granted on one ground, the scope of further proceedings can extend only to those issues that were raised before the first appellate authority and remained undisposed of.
Conclusion: The transfer pricing exercise could not be reopened de novo, and any fresh examination was confined to the issues agitated before the first appellate authority but not decided by it.
Final Conclusion: The matter was restored to the transfer pricing authorities for limited reconsideration of the comparable and related undecided issues, with the appeal succeeding only for statistical purposes.
Ratio Decidendi: For transfer pricing comparability, the comparable must have data for the same financial year as the tested party, and if the annual accounts do not directly yield such figures, the company is not a valid comparable; on remand, only the undecided issues within the original appellate challenge can be reopened, not the entire assessment de novo.
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