Entity-level TNMM applies where royalty and management fee transactions are closely connected with other international transactions.

Royalty and management fee payments, having a close nexus with the assessee's other international transactions, were held not to require separate benchmarking. The transfer pricing study adopted by the assessee had already been accepted, and the transactions were treated as forming part of an integrated entity-level arrangement. Accordingly, aggregation with the remaining international transactions was required to determine the arm's length result by applying TNMM at entity level. The matter was remanded to the TPO and the Assessing Officer for such aggregation and benchmarking.

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Issues: Whether the royalty and management fee transactions, being closely connected with the assessee's other international transactions, were required to be aggregated and benchmarked at the entity level by applying the Transactional Net Margin Method.

Analysis: The transfer pricing study adopted by the assessee had already been accepted, and the royalty and management fee payments were found to have a close nexus with the remaining transactions. On that basis, separate benchmarking of only those transactions was not warranted, and aggregation with the other transactions was required for determining the arm's length result at entity level.

Conclusion: The matter was remanded to the Transfer Pricing Officer and the Assessing Officer to aggregate the royalty and management fee transactions with the other transactions and benchmark them by adopting TNMM at entity level.

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