STOTLAND | GLOBAL TP MONITOR A weekly Review of Global Transfer Pricing Developments
Issue No. 01 | September 18th, 2026
Two Karnataka High Court decisions reported this week arrive at essentially the same destination from different directions: one through comparable-company selection and the other through functional characterization. In both cases, the Court declined to disturb fact-intensive transfer pricing findings reached by the Tribunal.
The common thread is worth emphasizing. Transfer pricing disputes may begin with methods, margins and comparables, but once a reasoned factual record has been established at Tribunal level, the scope for re-litigating that analysis on appeal can narrow considerably.
I. Case Law
1. India — Apotex Research Private Ltd.
Jurisdiction: India
Court: Karnataka High Court
Reported: 18 September 2026
Case / Citation: TS-736-HC-2026(KAR)-TP
Topic: TNMM | Comparable-company selection | Appellate review
Background
Apotex Research Private Ltd. provides pharmaceutical research and development services. The underlying transfer pricing dispute concerned the benchmarking of its controlled services under TNMM and, in particular, the selection and exclusion of comparable companies.
The dispute ultimately reached the Karnataka High Court after the Tribunal had ruled on the suitability of the relevant comparables. Revenue challenged the Tribunal's conclusions and sought High Court intervention in its comparable-company analysis. Apotex, by contrast, defended the Tribunal's findings and the exclusions made on the basis of the relevant characteristics of the companies under review.
High Court decision
The Karnataka High Court dismissed Revenue's appeal. According to the reported decision, Revenue was unable to identify an error in the Tribunal's findings concerning comparable-company selection sufficient to justify intervention by the High Court.
The result reinforces an important distinction in transfer pricing litigation: a disagreement over which companies belong in a comparable set does not necessarily amount to a question of law.
Where the Tribunal has considered the relevant facts and reached a reasoned conclusion regarding comparability, persuading a higher court to revisit that analysis may require considerably more than simply proposing a different set of comparables.
Why it matters
Comparable-company disputes can consume an extraordinary amount of time during a transfer pricing audit. Filters are debated, annual reports are dissected, functional differences are identified and companies move in and out of the set—sometimes more than once.
Apotex is therefore a useful reminder that much of that work ultimately remains fact-intensive. Once the Tribunal has reached a reasoned factual conclusion, the ability of either party to reopen the exercise at High Court level may be limited unless a material legal or factual error can be demonstrated.
For taxpayers, that places even greater importance on developing the comparability record early: documenting functional differences, applying screening criteria consistently and establishing a clear rationale for each material inclusion or exclusion.
Practitioner's note: A comparable-company dispute may travel a long way through the courts, but that does not necessarily transform it into a question of law. Sometimes a comparable is simply comparable—or it isn't.
2. India — Cisco Systems (India) Pvt. Ltd.
Jurisdiction: India
Court: Karnataka High Court
Reported: 18 September 2026
Case / Citation: TS-735-HC-2026(KAR)-TP
Topic: Functional characterization | Comparability | Appellate review
Background
The underlying dispute concerned the functional characterization of Cisco Systems (India) Pvt. Ltd. and the consequences of that characterization for its transfer pricing analysis.
The issue is fundamental to TNMM benchmarking. The way in which the tested party is characterized—based on its functions performed, assets employed and risks assumed—directly influences the selection of comparables and, ultimately, the arm's-length result.
Revenue challenged the Tribunal's reasoning concerning Cisco India's functional profile, while Cisco defended the Tribunal's characterization and the resulting transfer pricing analysis.
High Court decision
The Karnataka High Court dismissed Revenue's appeal and left the Tribunal's reasoning concerning the taxpayer's functional profile undisturbed.
As with Apotex, the significance of the decision lies partly in what the High Court did not do: it did not undertake a fresh transfer pricing analysis simply because Revenue disagreed with the Tribunal's factual conclusions.
The case therefore provides another example of the limits of appellate intervention where the underlying transfer pricing determination turns principally on the factual record.
Why it matters
Functional characterization can sometimes become almost boilerplate language in transfer pricing documentation: functions performed, assets employed, risks assumed—and onward to the benchmarking.
Cisco is a useful reminder that the FAR analysis is not merely the introductory chapter before the “real” transfer pricing analysis begins. It is the foundation on which much of that analysis rests.
Characterizing an entity as a limited-risk service provider, contract R&D provider or another routine operating entity has consequences for method selection, tested-party selection, comparable-company selection and the expected return.
The documentation should therefore do more than attach labels. It should demonstrate how the entity actually operates and connect that economic reality to the benchmarking methodology being applied.
Practitioner's note: Calling an entity “limited risk” repeatedly does not make it limited risk. The FAR analysis still has to do the heavy lifting.
Overall Takeaway
The two Karnataka High Court decisions reported this week arrive at essentially the same destination from different directions.
Apotex concerns the companies against which the taxpayer is benchmarked. Cisco concerns the economic characterization of the taxpayer being benchmarked. In both cases, the High Court declined to disturb fact-based conclusions reached by the Tribunal.
That produces a useful practical lesson for transfer pricing controversy: the Tribunal stage may effectively be the last meaningful opportunity to win the factual argument.
Comparable selection, functional characterization and the underlying FAR analysis are inherently evidence-driven exercises. Once a Tribunal has considered that evidence and reached a reasoned conclusion, an appellate court may be reluctant to reconstruct the transfer pricing analysis merely because one party would have weighed the facts differently.
For practitioners, the message is therefore straightforward: build the factual record as though there may not be another opportunity to rebuild it later.
Document what the entity actually does. Explain why the selected comparables are comparable. Explain why the rejected companies are not. And make the connection between the FAR analysis and the benchmarking explicit.
Because by the time the dispute reaches the High Court, the question may no longer be whether your transfer pricing analysis was better—it may be whether there is any legal basis for the court to reconsider the factual analysis at all.
That, perhaps, is the less glamorous side of transfer pricing documentation. But as these two cases demonstrate, it can also be the part that ultimately matters most.
Sources: Revenue v. Apotex Research Private Ltd., TS-736-HC-2026(KAR)-TP; Revenue v. Cisco Systems (India) Pvt. Ltd., TS-735-HC-2026(KAR)-TP.
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