Clarivate Analytics Functional Mismatch accepted

The assessee, Clarivate Analytics (India) Private Limited, challenged a transfer pricing adjustment of approximately Rs. 18.80 crores arising from benchmarking of its IT enabled services segment. 

The assessee functioned as a limited-risk captive service provider engaged primarily in content development and editing support services for associated enterprises within the Clarivate Analytics group and was remunerated on a cost-plus basis.

The Transfer Pricing Officer rejected portions of the assessee’s benchmarking analysis and included MPS Ltd. as a comparable company, resulting in a substantially enhanced arithmetic mean margin of 25.29%. 

The assessee contended that MPS Ltd. was functionally dissimilar because it operated as a diversified publishing solutions and platform-development company engaged in software-driven product development, content transformation solutions, acquisitions, research and development, and entrepreneurial business activities unsupported by segmental reporting.

The Tribunal accepted the assessee’s contentions after undertaking detailed examination of the annual report of MPS Ltd. and judicial precedents for the same assessment year. It held that MPS Ltd. operated under an entirely different business model involving platform solutions, software-enabled publishing products, acquisitions, and end-to-end digital publishing functions which rendered it incomparable to a routine captive ITES service provider