« Top Headlines » Open DEMAT Account in 24 hrs  Delhi HC Rules GST Registration Cannot Be Cancelled Retrospectively Without a Clear Show Cause Notice (SCN)  Belated income tax return AY 2026-27: How to file, late filing charges and what you may lose  Major Financial Changes from August 1, 2026: ITR Deadline, RBI MPC Meeting, Tatkal Ticket Rules & More  Government proposes to ease tax relief conditions for offshore funds  TallyPrime Connected Banking: Automating Banking and Accounting  ITR Filing Deadline 2026: Is July 31 the Last Date to File Your Income Tax Return? Latest Official Update  ITR filing deadline nears: How to file income tax return online on e-filing portal - quick 15-step guide  Will the ITR Filing Deadline Be Extended Beyond July 31 for FY 2025-26? Here's the Latest Update for Taxpayers  Income Tax Refund Delayed for AY 2026-27? 5 Common Reasons Your Refund May Be Stuck and How to Fix It  ITR Filing 2026: FM Nirmala Sitharaman Asks Tax Officials to Let Honest Taxpayers Correct Genuine Mistakes  Will Your FCNR Deposit Stay Tax-Free After Returning to India? Tax Rules Explained for NRIs «  Tax norms for foreign service providers still confusing... Tax-saving is a year-long business... » ITAT mathematics: Transfer pricing is no science November, 06th 2007 The Income-Tax Appellate Tribunal has held that transfer pricing is not an exact science in which mathematical certainty is possible and some approximations cannot be ruled out. The case relates to transfer pricing of captive software development services rendered by an Indian subsidiary Mentor Graphics to its US-based overseas parent. Mentor Graphics had carried out a detailed transfer pricing analysis and documentation choosing a set of comparables, which was rejected by the first level audit officer and the latters decision upheld by the commissioner (appeals). The tribunal, however, did not approve of the order of the transfer pricing officer and deleted the adjustment to the taxpayers income made by him, upholding the transfer price paid the taxpayer. The primary issue in the case was the choice of appropriate comparables for benchmarking or comparing the profits of the Indian entity, in order to evaluate the adequacy of the transfer prices between the Indian entity and its overseas parent. The tribunal contended that transfer pricing is not an exact science in which mathematical certainty is possible. It needs to be prima facie shown that the transaction was properly examined, comparable prices were objectively fixed, in a bona-fide, honest manner as required by law. Transfer pricing provisions primarily require any income arising from an international transaction between two or more associated enterprises to be at arms length price and comparable to similar transactions between unrelated enterprises. A proper study of all the specific characteristics of the transaction needs to be undertaken, including analysis of functions, assets and risks taking into account economically significant activities and responsibilities of the enterprises, it ruled, saying that a mere broad comparison was not sufficient enough. This landmark ruling is a step in the right direction, as it focuses on economic issues and recognises commercial realities of businesses, which are the key in any transfer pricing analysis. Further, the ruling gives a direction to transfer pricing officer that once taxpayers undertake appropriate due diligence, their analysis cannot be arbitrarily rejected during audits based on inferences and presumptions, said PwC executive director Shyamal Mukherjee.