Aggregated TNMM benchmarking prevents separate adjustment of embedded royalty and service costs; TDS and computation issues require fresh verification.

Aggregated benchmarking under the Transactional Net Margin Method (TNMM) treats interrelated international transactions as part of the tested segment. Where royalty and Global Accounts Manager charges are already included in the logistics segment's operating costs and assessed through the combined approach, separately benchmarking those same components may distort the arm's length analysis and result in duplicate adjustments. The note therefore identifies separate transfer pricing adjustments for those costs as impermissible once the combined TNMM approach is accepted. It also records that claims concerning TDS credit and errors in computing interest and fees require fresh verification by the assessing authority after providing the assessee an opportunity to be heard.

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Issues: (i) Whether separate transfer pricing adjustments could be made for royalty payment and Global Accounts Manager charges after accepting the combined transaction approach under TNMM for the logistics segment; (ii) Whether the assessee's claim for TDS credit and correction of computation of interest and fee payable required restoration for fresh verification.

Issue (i): Whether separate transfer pricing adjustments could be made for royalty payment and Global Accounts Manager charges after accepting the combined transaction approach under TNMM for the logistics segment.

Analysis: The logistics segment had been benchmarked by including royalty and GAM charges in the operating cost under the combined transaction approach using TNMM. While accepting that approach for the segment, the transfer pricing authorities nevertheless segregated royalty and GAM charges for separate benchmarking and determined separate adjustments. The order followed earlier years in the assessee's own case and the binding principle that once TNMM is accepted for aggregated benchmarking of interlinked transactions, one cost element already embedded in the tested segment cannot again be separately benchmarked without distorting the arm's length analysis.

Conclusion: Separate ALP adjustments for royalty and GAM charges were not permissible after acceptance of the combined TNMM approach for the logistics segment; this issue was decided in favour of the assessee.

Issue (ii): Whether the assessee's claim for TDS credit and correction of computation of interest and fee payable required restoration for fresh verification.

Analysis: The record showed a grievance regarding non-grant of TDS credit and a computation error in arriving at the total interest and fee payable. These matters required correction and fresh examination by the assessing authority in accordance with law after giving opportunity to the assessee.

Conclusion: The issues relating to TDS credit and computation error were restored to the Assessing Officer for fresh decision; this issue was partly in favour of the assessee.

Final Conclusion: The transfer pricing additions on royalty and GAM charges were deleted, while the computation-related grievances were sent back for fresh adjudication.

Ratio Decidendi: Where interrelated international transactions are benchmarked on an aggregated basis under TNMM and the relevant royalty or service costs are already included in the operating cost of the tested segment, those very components cannot be separately benchmarked again for independent ALP adjustments.

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