The Delhi HC ruled that a company's ₹86 lakh ITeS turnover cannot be compared with American Express's ₹782 crore turnover for transfer pricing analysis due to the significant scale differences. This ruling impacts how companies approach transfer pricing assessments in India.
Delhi HC Ruling on Transfer Pricing Comparisons
The Delhi High Court recently addressed the issue of comparability in transfer pricing analyses, determining that a company with a turnover of ₹86 lakh in the ITeS sector cannot be compared to American Express, which has a turnover of ₹782 crore. This decision highlights the importance of scale in determining comparability for transfer pricing purposes.
The Court noted the vast difference in operational scale and market influence between the two entities, stating that transfer pricing analysis requires consideration of the economic realities of each business. It emphasized that the legitimacy of comparables revolves heavily around factors such as financial metrics and operational scope.
“A significant difference in turnover implies a disparity in operational scale, which must be reflected in transfer pricing analysis,” the court stated.
This judgment underscores the need for companies, particularly those in ITeS, to carefully select comparables when preparing transfer pricing documentation, ensuring that they reflect realistic business conditions. Practitioners must now pay closer attention to the financial metrics used in their analyses to establish appropriate comparables.
Citations
- Company Name (2026) Delhi HC Order
