In the case of Chrys Capital Investment Advisors (India) Pvt. Ltd. v. DCIT ITA No. 417 of 2014, the Delhi High Court confirmed a verdict of the Delhi Bench of Income-tax Appellate Tribunal that if a company has high or extremely high profits and losses, these factors alone do not automatically result in its exclusion as a comparable company for purposes of determining the arm’s length price.
In determining a list of comparable companies, there must be a detailed analysis of services provided, assets employed, risks assumed, and other factors to determine the comparability.
Also, there must be an analysis as to whether any material difference between a comparable company and the taxpayer can be eliminated, and if not, then the company is not to be included as a comparable.
