The second possibility, the “deductive” approach, starts with a wide set of companies that operate in the same sector of activity, perform similar broad functions and do not present economic characteristics that are obviously different. The list is then refined using selection criteria and publicly available information (e.g. from databases, Internet sites, information on known competitors of the taxpayer). In practice, the “deductive” approach typically starts with a search on a database. It is therefore important to follow the guidance on internal comparables and on the sources of information on external comparables, see paragraphs 3.24-3.39. In addition, the “deductive” approach is not appropriate to all cases and all methods and the discussion in this section should not be interpreted as affecting the criteria for selecting a transfer pricing method set out in paragraphs 2.1-2.12.
TPG2017 Chapter III paragraph 3.42
Category: A. Performing a comparability analysis, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter III: Comparability Analysis | Tag: Benchmark study, Commercial databases, Comparability analysis, Comparables search, Databases, Deductive approach, External comparables« Prev | Next »
TPG2017 Chapter III paragraph 3.33
Use of commercial databases should not encourage quantity over quality. In practice, performing a comparability analysis using a commercial database alone may give rise to concerns...TPG2017 Chapter III paragraph 3.32
It may be unnecessary to use a commercial database if reliable information is available from other sources, e.g. internal comparables. Where they are used, commercial databases...TPG2017 Chapter III paragraph 3.31
A number of limitations to commercial databases are frequently identified. Because these commercial databases rely on publicly available information, they are not available in all countries,...TPG2017 Chapter III paragraph 3.30
A common source of information is commercial databases, which have been developed by editors who compile accounts filed by companies with the relevant administrative bodies and...TPG2017 Chapter III paragraph 3.29
There are various sources of information that can be used to identify potential external comparables. This sub-section discusses particular issues that arise with respect to commercial...
TP case laws
India vs. Quark Systems Pvt. Ltd. Oct 2014, ITA No.282