Significance and implications of the Apex Court's Ruling on 'Substantial Question of Law' for Transfer Pricing matters

The Hon’ble Apex Court, in its order dated 19 April 2023, in the case of SAP Labs India Pvt. Ltd. quashed and set aside the ruling of the High Court (HC) and observed that the selection of comparables, the application of filters, etc. gives rise to a substantial question of law and thereby remitted back the case to the HC to decide the matter afresh. Civil Appeals were preferred by the Revenue and a few of the taxpayers arising out of the orders passed by various HCs, more particularly the HC of Karnataka, in the case of SAP Labs India Pvt. Ltd.

In this context, it is pivotal to understand what the substantial question of law means and its interplay with Transfer Pricing principles.