Integrated trading and customer-support functions may be benchmarked at entity level when segment bifurcation is artificial.

Trading and customer-support activities within an integrated business model may not be artificially split for transfer pricing benchmarking where the functions, assets and risks are intertwined. The Tribunal followed its earlier year's approach and accepted that the core business remained trading, with customer services operating as part of the same commercial arrangement and supply chain support. On that basis, a separate trading segment was not justified and entity-level TNMM benchmarking was accepted in favour of the assessee.

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Issues: Whether the trading segment could be carved out from the assessee's integrated business model and benchmarked separately instead of applying Transactional Net Margin Method at entity level.

Analysis: The dispute centred on whether the trading and customer-service functions were so interlinked that they could not be segregated for transfer pricing purposes. The Tribunal followed its earlier decision in the assessee's own case for the immediately preceding year and noted that the core business was trading, while the customer services were connected with the same commercial arrangement and depended substantially on the same supply chain and support structure. It held that a mere presence of service activity did not justify artificial bifurcation of the business into separate segments for benchmarking, especially when the functions, assets and risks were intertwined.

Conclusion: The carving out of a separate trading segment was not justified and the assessee's entity-level TNMM approach was accepted. This issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded only on the transfer pricing segmentation issue, while the remaining grounds were not adjudicated and were left open.

Ratio Decidendi: Where trading and related customer-support activities are inextricably linked within an integrated business model, artificial segmental bifurcation for transfer pricing benchmarking is impermissible and entity-level benchmarking may be accepted.

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