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2017 (4) TMI 1011 - ITAT MUMBAITransfer pricing adjustment - payment of royalty made by the assessee to its Associated Enterprise (AE) - Held that:- In our considered opinion the rates of payment of royalty approved by the RBI or by the FIPB (relying upon the rates allowed by RBI under automatic route) would not become per se or conclusively or ipsofacto ‘ALP’ rates. In our opinion both the legislation operate into different fields. The rates allowed under the automatic route by the RBI or FIPB are meant to achieve objectives in different areas. The whole thrust of the income tax proceedings and transfer pricing regulations is to ensure that taxable profit earned by an entity India are not shifted to foreign tax jurisdiction without payment of legitimate share of tax due in India. Therefore, in our considered opinion, independent exercise of determination of ‘ALP’ is needed to be done to find out if payment of royalty has been dome in line with ‘Arm’s Length Price’ or not. It has become all the more necessary now in view of Press Note No.8 (2009 series) dated 16.12.2009 brought on record before us, since restriction on the rates of payment of royalty has been waived by concerned authorities. Therefore, the ‘ALP’ of the royalty needs to be determined in accordance with the Transfer Pricing Regulations. However, we also find force in the contention raised by the Ld. Counsel that if an authority by way of any specific approval has allowed a particular rate of payment, then it does carry persuasive value and can of course act as one of the supportive tools for carrying out bench marking of transaction of payment of royalty. Thus, under these circumstances and in view of aforesaid discussion, we find it appropriate to send this issue back to the file of the AO, as has been done by Tribunal in AY 2010-11 in assessee’s own case. The assessee shall be free to carry out fresh transfer pricing study and independently bench mark its aforesaid international transaction with independent comparables for establishing the payment made by it at Arm’s Length Price. The AO/TPO shall also be free and duty bound to take on record and consider all the evidences as may be brought on record by assessee to justify ‘ALP’ of the impugned transaction. Thus, with these directions this issue is sent back to the file of the Assessing Officer/TPO and may be treated as allowed in favour of assessee for statistical purposes. Disallowance on account of late payment of employees contribution towards provident fund and ESIC - Held that:- The fact was shown to us that entire payment has been deposited within the financial year 2011-12, as has also been mentioned by the Assessing Officer in the assessment order itself. Under these circumstances, we find that the disallowance made by lower authorities is not sustainable and therefore same is hereby deleted. - Decided in favour of assessee
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