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Issues: Whether the rejection of the assessee's duly certified segmental results for benchmarking the international transaction of business support services, and the consequent transfer pricing adjustment, was justified.
Analysis: The segmental accounts were maintained in the accounting system with direct costs booked to the relevant segment and only limited common costs apportioned. The reasons given for discarding the segmental results were found to rest on conjecture rather than cogent material. The objections relating to lease rent, recruitment expenses, and legal and professional charges were not supported by a proper factual basis to justify rejection of the segmental working. In the absence of reliable material to discredit the certified segmental results, there was no justification for benchmarking at an entity level and disregarding the segment-wise computation furnished by the assessee.
Conclusion: The rejection of the segmental results was unjustified and the segmental results furnished by the assessee were required to be considered. The issue was decided in favour of the assessee.
Ratio Decidendi: Duly certified segmental results cannot be rejected for transfer pricing purposes in the absence of cogent material showing that they are unreliable or incorrect.
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