Functional comparability under TNMM requires highway contract benchmarks to reflect operation, maintenance and transfer activities, requiring fresh benchmarking.

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....Transfer-pricing benchmarking of subcontract payments under a highway operation, maintenance and transfer contract must use the Transactional Net Margin Method where Common Schedule of Rates cannot be reliably correlated with the work allocated under related-party and third-party subcontracts. The schedule rates, including basic and premium components, were not shown to permit verification as an internal comparable; the proposed other method was therefore not accepted. Comparables selected on a build, maintain and transfer profile were functionally unsuitable because the contract covered operation and maintenance of an existing highway with ancillary facilities. Fresh benchmarking was directed using functionally comparable operation, maintenance and transfer entities after giving the assessee an opportunity to respond.....