APA margin can guide arm's length pricing for similar non-covered transactions when no separate benchmarking is done.

Where transactions not covered by a Bilateral Advance Pricing Agreement are functionally indistinguishable from covered transactions and no separate benchmarking is undertaken, the agreed APA/BAPA margin may be adopted as a persuasive arm's length benchmark. The tribunal accepted that the non-covered associated enterprise transactions showed no material difference in functional, asset, and risk profile, and applied the same margin on the principle of consistency. The transfer pricing adjustment was therefore reduced by extending the agreed margin to the remaining international transactions.

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Issues: Whether the margin agreed under the Bilateral Advance Pricing Agreement could be adopted for determining the arm's length price of international transactions with associated enterprises not covered by that agreement.

Analysis: The assessee's non-US associated enterprise transactions formed only a small portion of total revenue, and no separate benchmarking was undertaken for those transactions. The record did not show any material difference in the functional, asset, and risk profile of the non-covered transactions vis-a -vis the transactions covered by the Bilateral Advance Pricing Agreement. In such a situation, the agreed margin under the agreement was treated as a reliable and persuasive benchmark for determining the arm's length price, particularly where the same assessee had been subjected to a uniform transfer pricing approach and the principle of consistency supported adoption of the accepted margin.

Conclusion: The margin under the Bilateral Advance Pricing Agreement was directed to be applied to the transactions with non-US associated enterprises, and the assessee succeeded.

Final Conclusion: The transfer pricing adjustment was reduced by applying the agreed APA/BAPA margin to the remaining international transactions, and all the connected appeals were allowed.

Ratio Decidendi: Where transactions not covered by an APA or BAPA are functionally indistinguishable from covered transactions and no separate benchmarking is carried out, the agreed APA or BAPA margin may be adopted as a persuasive arm's length benchmark on the principle of consistency.

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