Decision on the appropriateness of the comparables and the manner in which the 5% variance allowance is computed

The Indian Income Tax Appellate Tribunal (ITAT) delivered its decision on 14 March 2012 in the case of DCIT v. Roche Diagnostics India Pvt Ltd (51 SOT 1) that the companies chosen by the tax authorities were not comparable to the functions carried out by the Taxpayer (i.e. Roche Diagnostics India Pvt Ltd) while it found that the companies chosen by the Taxpayer were functionally comparable. It further states that, in the Transactional Net Margin Method (TNMM method), the 5% varia…