Tax/Income Tax : Selection of Comparables in Transfer Pricing under Income-tax Act, 1961 : Appeal by Tax Department Dismissed

Tax/Income Tax : Selection of Comparables in Transfer Pricing under Income-tax Act, 1961 : Appeal by Tax Department Dismissed

In a recent judgment passed in December 2025, appeal of income tax Department has been dismissed.

It was held that there is force in the contention of the assessee that royalty agreements operating in different geographical regions can be applied as a filter as the Ld. TPO himself has accepted royalty agreements operating in foreign jurisdictions.

When the three comparables considered by the Ld. TPO in the remand report are from the same geographical location (i.e. USA) and hence in the objection relating to difference in geographical region does not hold good.

When all the three comparables selected by the Ld. TPO and the comparables selected by the assessee belong to same industry i.e. “kitchenware and home furnishing items” then these are valid comparables.

The Ld. TPO rejected two of his own comparables by holding that these two comparables are providing know-how whereas the assessee is not obtaining know-how which is incorrect as evident from the license agreement as well as other documentary evidence submitted by the assessee.

It was noted that when the assessee has paid royalty for use of trademark and marketing information /marketing know-how and all the eight comparables listed are from the same geography and same industry and hence are valid comparables to that of the assessee. Accordingly, the Ld. AO/TPO was directed to include the aforesaid eight comparables in the final set of comparable agreements for the purpose of benchmarking the payment of royalty by the assessee.

Case reference is PCIT v. Tupperware India Pvt Ltd [2025] GCtR 1834 (Delhi).