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2017 (5) TMI 1513 - ITAT, PUNETreatment of sales tax/purchase tax subsidy received from SICOM - whether capital receipt or revenue receipt - Held that:- The facts and issue arising in the present appeal are identical to the issue before the Tribunal in assessee's own case and hence to avoid repetition, we adopt our reasoning given in assessment year 2006-07 for holding that the sales tax/purchase tax subsidy received by the assessee is capital receipt. We find that the said scheme of Government of Maharashtra was considered by the Hon'ble Bombay High Court in CIT v. Kirloskar Oil Engines Ltd. (2014 (5) TMI 586 - BOMBAY HIGH COURT ) and it has been held that the object of assistance under subsidy scheme to enable assessee to set up new unit, was a capital receipt. Following the same parity of reasoning, we hold that the subsidy received by the assessee was capital in nature. Ad hoc disallowance of royalty paid by the assessee company to its associated enterprises - Held that:- Pune Bench of Tribunal in M/s. Spicer India Limited v. ACIT (2017 (4) TMI 908 - ITAT PUNE), wherein there was similar case of payment of royalty where the TPO has violated the provisions of the Act and proposed the TP adjustment, but no separate adjustment was made on account of another adjustment and the same was subsumed in that; wherein the other TP adjustment was deleted by the DRP and the Assessing Officer in the final assessment order proposed the TP adjustment on account of royalty. Such procedure has not been followed by the TPO/Assessing Officer in the present facts and accordingly, we hold that there is no merit in the ad hoc disallowance of ₹ 7.50 crores. Coming to the merits of the case, where the royalty has been paid by the assessee at a rate lesser than 3% as against which the RBI has approved the rate at 3% for payment of royalty, then the same is at arm's length and this issue also considered by the Pune Bench of Tribunal in M/s. Spicer India Limited v. ACIT (supra). The Hon'ble Bombay High Court in CIT v. SGS India Pvt. Ltd. [2015 (11) TMI 1619 - BOMBAY HIGH COURT] had held the rate of royalty approved by SIA/RBI would constitute cup data and the transaction would be at arm's length price. Accordingly, we hold that where the payment of royalty by the assessee to its associated enterprises is at rate less than 3%, then the same is liable to be considered at arm's length rate and no addition is warranted on this account. Accordingly, we hold so.
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