Transfer pricing for royalty payments must be tested independently; UK MAP terms cannot be automatically extended to non-UK entities.

A MAP settlement for transactions with UK entities could not be mechanically extended to royalty paid to non-UK associated enterprises because the transaction context differed. The arm's length price for the non-UK royalty payments had to be determined independently on the facts and in accordance with law, rather than by automatically applying the UK MAP rate. The issue was therefore remitted to the AO/TPO for fresh consideration, with partial relief to the assessee on this ground.

---

---

Issues: Whether the transfer pricing adjustment relating to royalty paid to non-UK associated enterprises required fresh examination in the light of the MAP and APA positions concerning UK entities.

Analysis: The appeal concerned royalty adjustments, but the substantive dispute that survived related only to royalty paid to non-UK entities. The MAP settlement for UK entities was not automatically applicable to transactions with non-UK associated enterprises, since the rights and transaction context were different. At the same time, the prior coordinate bench approach in a similar matter showed that the arm's length price for non-UK transactions had to be determined on its own facts and in accordance with law, rather than by mechanically applying the UK MAP rate. On that basis, the proper course was to send the issue back for fresh consideration.

Conclusion: The issue was remitted to the AO/TPO for fresh adjudication, and the assessee obtained partial relief on this ground.

Ratio Decidendi: A MAP settlement for transactions with one jurisdiction cannot be mechanically extended to different non-covered associated enterprises; the arm's length price must be determined independently on the facts of the particular transaction.

---