ITAT Delhi Orders Fresh Transfer Pricing Computation Based on Audited Segmental Financials

The Delhi bench of the Income Tax Appellate Tribunal issued an order directing a fresh transfer pricing recalculation for Organica Water. The tribunal mandated that this new computation must rely strictly on audited segmental accounts rather than company-wide financials. Additionally, the bench ordered the removal of four diversified engineering entities from the list of comparable companies used for benchmarking.

This ruling addresses common transfer pricing disputes where broad-level financials distort the arm's length price of specialized business segments. By requiring audited segmental data, the tribunal ensures that the benchmarking exercise aligns closely with the taxpayer's specific operational profile. Excluding diversified engineering firms prevents skewed comparisons against specialized water sector operations.

Tax practitioners representing specialized engineering companies must prepare audited segmental statements during transfer pricing audits to withstand scrutiny. Affected organizations should initiate the recalculated benchmarking exercise using the remaining valid comparables as directed by the tribunal.