Transfer pricing benchmarking required fresh analysis after mismatch between IT enabled services and software development comparables.

A transfer pricing adjustment based on software development comparables could not stand where the assessee had characterised its services as information technology enabled services. The functional mismatch required a fresh benchmarking exercise and reconsideration of the arm's length determination. The matter was remitted to the Assessing Officer and Transfer Pricing Officer for de novo assessment, with an opportunity of hearing to the assessee.

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Issues: Whether the transfer pricing adjustment required fresh benchmarking analysis and consequent remand for de novo assessment.

Analysis: The assessee had characterised its services as information technology enabled services, whereas the transfer pricing adjustment was made by adopting comparables engaged in software development services. The mismatch in functional characterisation and comparables warranted a fresh examination of the benchmarking exercise and the arm's length determination.

Conclusion: The matter was remitted to the Assessing Officer and Transfer Pricing Officer for de novo assessment after granting opportunity of hearing to the assessee.

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