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2011 (12) TMI 174 - AT - Income TaxTransfer Pricing – dis-allowance of royalty payment - Revenue contending assessee to be contract manufacturer – assumping that specific goods were manufactured for AE therefore, no royalty was needed to be paid - whether the royalty paid @ 3% of the net sale price stands justified - Held that:- Assessee has placed on record various evidences to prove that royalty payment at 8% on export and 5% on domestic sales has been referred as a reasonable payment. However, TPO failed to bring any material on the record which can suggests that payment of royalty @ 3% was excessive, and not at arm's length price. Further, only a fraction of goods manufactured by the assessee have been sold to the AE. Bulk of sales are to uncontrolled parties. Thus, the assessee is not a captive manufacturer supplying all manufactured goods to the AE. In fact, the technology has been used for manufacturing and supplying goods to independent parties also. Therefore, it cannot be said that the assessee is a contract manufacturer.– Decided against the Revenue.
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