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2019 (12) TMI 456 - AT - Income TaxTP Adjustment - determination of the ALP under the machinery of computation under the methods as given in Rule 10B - definition of `transaction’ as given in rule 10A(d) - whether the transactions of the assessee in Production and Distribution segments can be construed as ‘closely linked transactions’? - HELD THAT:- Transactions of Production and Distribution segments cannot be clubbed because it is neither a case of package deal nor the two sets of transactions are structured in such a manner that the assessee has no option to accept one and reject the other nor they are so inextricably linked that one cannot survive without other. In fact, in all the earlier years, the assessee was exclusively in the trading of components and the manufacturing activity started at the fag end of the preceding year only. Instantly, we are dealing with a situation in which the assessee is trying to club the transaction of Production of finished goods with Trading of spare parts, which is a step further away from technical know-how in the process of manufacturing. In view of the foregoing discussion, it is held that the authorities below were fully justified in holding that the Manufacturing segment cannot be aggregated with the Distribution segment and both need to be benchmarked independent of each other. We, therefore, accord our imprimatur to the view canvassed by the TPO in rejecting the aggregation approach adopted by the assessee. Once it is held that the international transaction of the Production segment is required to be benchmarked separately, then the next question is the determination of the ALP. The ld. AR candidly admitted that if the aggregation is not to be done, then there is no flaw in the computation of the ALP and the consequential transfer pricing addition in the final assessment order. We, therefore, uphold the transfer pricing addition in the international transaction of Production segment.
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