Functional comparability and reliable segmental data govern transfer-pricing benchmarking, excluding businesses with distinct models, intangibles, or service functions.

Transfer-pricing comparability must rest on actual functions performed and reliable segmental results. Software-product developers, bio-informatics and research entities, and companies owning significant intellectual property or intangibles are not comparable to captive software-development service providers. Similarly, seismic, infrastructure, engineering, architectural and technical consultancy providers are functionally distinct from sales and post-sales support service providers. The Tribunal's exclusions were sustained because its findings of functional dissimilarity and unavailable segmental information were supported by the record and not perverse. Concurrent factual findings on comparability should not be disturbed absent perversity.

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Issues: Whether the Tribunal rightly excluded the disputed companies from the transfer-pricing comparables for the software-development and sales and post-sales support service segments.

Analysis: The comparability analysis must be based on the functions actually performed and the availability of reliable segmental results. Companies engaged in software-product development, bio-informatics, research and development, or possessing significant intellectual property and intangibles were not comparable with a captive software-development service provider. Likewise, entities providing seismic, infrastructure, engineering, architectural, or technical consultancy services were functionally distinct from a provider of sales and post-sales support services. The Tribunal's factual findings on functional dissimilarity and absence of segmental information were supported by the record and were not shown to be perverse. The challenge concerning one company was also factually untenable because the Tribunal had excluded, rather than included, that company.

Conclusion: The exclusions directed by the Tribunal were sustained, and the question of law was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: In transfer-pricing benchmarking, functionally dissimilar entities, particularly those with different business models, intellectual-property ownership, research activities, or unavailable segmental results, cannot be retained as comparables; concurrent factual findings are not interfered with absent perversity.

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