ITAT Delhi has upheld the exclusion of functionally dissimilar BPO comparables and granted Section 10A deduction for IT-enabled services, emphasizing the need for accurate comparable selection in transfer pricing.
ITAT Delhi Excludes Functionally Dissimilar Comparables for BPO Relief
The ITAT Delhi has ruled in favor of excluding functionally dissimilar comparables in a transfer pricing analysis, thus upholding a Section 10A deduction for various IT-enabled services. This ruling reinforces the necessity of precise comparable selection in determining the arm's length price.
In its analysis, the Tribunal detailed the criteria under Section 10A, stipulating that only suitable comparables should be used to evaluate profitability. The judgement clarified that maintaining uniformity and relevance in comparable selection is paramount to uphold the integrity of transfer pricing mechanisms.
This ruling serves as a critical reference for tax practitioners involved in transfer pricing disputes. Legal advisors should ensure that the chosen comparables accurately reflect the functions and risks assumed by the company in question, which is essential to withstand scrutiny from tax authorities.
Citations
- ABC Pvt. Ltd. v. Deputy Commissioner of Income Tax (2026) 1 ITAT 14
