Comparability filters in TNMM require upfront R&D screening and broadly similar turnover scales for software services.

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....Post-search introduction of a research and development filter in transfer pricing comparability analysis is improper if it was not part of the initial search criteria; the filter must govern the search from the outset. Turnover is also a relevant comparability factor under TNMM because scale, market position, asset base, risk profile and economies of scale affect margins, so tested parties should be matched with enterprises operating at a broadly similar scale. On that basis, the note records exclusion of six high-turnover comparables and application of an upper turnover filter at 10 times the assessee's turnover for recomputation of arm's length price.....