Transfer pricing comparability requires segmental results before using a company as a reliable comparable in the software segment.

In transfer pricing comparability analysis, Megasoft Ltd. could be used as a comparable only after its segmental results were separately examined, because its overall results were not directly usable. The Tribunal followed coordinate bench decisions applying the same approach and accepted the segmentation exercise for the software segment. On that basis, the assessee's objection was allowed and the comparability issue was decided in favour of the assessee.

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Issues: Whether M/s. Megasoft Ltd. could be treated as a comparable in the software segment only after segmentation of its results.

Analysis: The Tribunal noted that the question was covered by coordinate bench decisions which held that Megasoft Ltd. could be considered as a comparable only after segmental results were examined. Following that view, the Tribunal applied the same approach to the appeal before it.

Conclusion: The company was to be considered as a comparable after segmentation of its results, and the assessee's ground was allowed.

Final Conclusion: The appeal succeeded on the comparability issue relating to Megasoft Ltd., with the matter decided in favour of the assessee.

Ratio Decidendi: A comparable in a transfer pricing exercise may be retained only after its segmental results are separately examined where the company's overall results are not directly usable.

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