Segment-wise transfer pricing benchmarking required where distinct business lines have reliable segmental accounts and support, not entity-level aggregation.

Where reliable segmental accounts supported by functional, asset and risk analysis are available, transfer pricing benchmarking must be undertaken segment-wise rather than by aggregating distinct businesses at entity level. Unaudited segment accounts cannot be rejected merely on that basis; a specific defect must be shown before they are disregarded. The document states that the assessee's AMC services and agency and marketing support services were treated as separate segments, and that comparables and margins had to be examined accordingly. The matter was therefore restored for limited verification of the segmental accounts, comparables, and whether the tested-party margin fell within the permissible tolerance range.

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Issues: Whether the assessee's transfer pricing adjustment could be sustained by aggregating two business segments as one, and whether the segment-wise benchmarking and segmental accounts required separate consideration for determining the arm's length price.

Analysis: The assessee's own case for the immediately preceding year had already accepted that the business comprised two distinct segments, namely AMC services and agency and marketing support services. The segmental accounts were based on functional, asset and risk analysis, and the mere fact that they were not audited did not by itself justify rejection without pointing out a specific defect. Once the segments were accepted as separate, benchmarking had to be undertaken segment-wise, and the comparables and margins had to be examined accordingly. The Tribunal therefore found it appropriate to restore the matter to the transfer pricing authority for limited verification of the segmental accounts and comparables, including whether the assessee's margin remained within the permissible tolerance range.

Conclusion: The transfer pricing adjustment could not be sustained on an entity-level aggregation basis and the issue was required to be examined segment-wise; the matter was restored for verification, with no adjustment to be made if the tested-party margin fell within the permissible tolerance range.

Final Conclusion: The assessee obtained partial relief on the core transfer pricing issue, and the dispute was sent back for limited factual verification rather than being finally concluded on merits.

Ratio Decidendi: Where reliable segmental accounts supported by functional, asset and risk analysis are available, transfer pricing benchmarking must be performed segment-wise and a segment cannot be rejected merely because the accounts are unaudited absent a specific demonstrated defect.

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