COMPARABILITY ANALYSIS AND THE ARM’S LENGTH STANDARD: EMERGING ISSUES IN INDIAN TRANSFER PRICING LAW

AUTHOR – VIGNESH* & PURNIMA TYAGI**

* LAW STUDENT AT LAW COLLEGE DEHRADUN, UTTARANCHAL UNIVERSITY, DEHRADUN

** PROFESSOR AT LAW COLLEGE DEHRADUN, UTTARANCHAL UNIVERSITY, DEHRADUN

BEST CITATION – VIGNESH & PURNIMA TYAGI, COMPARABILITY ANALYSIS AND THE ARM’S LENGTH STANDARD: EMERGING ISSUES IN INDIAN TRANSFER PRICING LAW, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (1) OF 2026, PG. 613-618, APIS – 3920 – 0001 & ISSN – 2583-2344.

ABSTRACT

The comparability analysis is one of the key pillars of the arm-length principle and can be seen as the major tool of the identification of whether international transactions between associated enterprises are being conducted at market-based prices. In the Indian transfer-pricing regime, the comparability analysis has gained crucial significance because of the growth of the cross-border transactions, the development of the digital economy and the increased attention of tax authorities. Despite the elaborate statutory propinquity in the Income-Tax Act, 1961, along with new rules of addition to it, the practical application of comparability standards has yet to be made, a path of great difficulty. They include the choice of appropriate comparators, the accessibility and trustworthiness of data, the use of quantitative and qualitative filters and too much discretionary latitude used by Transfer Pricing Officers.

This paper is the critical analysis of the new concerns in comparability analysis in India especially its application in the determination of the arm-length price. It examines the provisions of the law, administrative adjudication and emerging judicial interpretations with a view to enlighten discrepancies and regions of misnegeny. The paper also analyses how Indian practice is impacting on the OECD Transfer Pricing Guidelines and the post-BEPS developments. Through the evaluation of the recent litigation and dispute resolution trends, the article holds that a more principled, consistent, and taxpayer-friendly approach to comparability analysis, to strike a balance between revenue interests and commercial realities and international standards, could be found.

KEYWORDS: Transfer Pricing; Arm-Length Principle; Comparability Analysis; FAR Analysis; OECD Guidelines; Indian Tax Law; International Transactions; Transfer of Pricing Litigation.