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2018 (12) TMI 1556 - AT - Income TaxTransfer Pricing Adjustment - transactions benchmarked using Transactional Net Margin Method (TNMM) - adjustment on account of realisation of bills beyond 90 days from the Associated Enterprise - Held that:- As pointed out by the learned Counsel, the undisputed position is that the assessee had allowed credit period beyond 90 days in the case of Non-Associated Enterprises, i.e. independent enterprises as well. Once this fact is not disputed, the transactions with the non-AE constitute valid Internal CUP inputs and ALP adjustment on account of realisation of bills beyond 90 days from the Associated Enterprise cannot be justified. In view of above discussions we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment. TDS u/s 195 - Disallowance of provision for royalty expenses - expenses as disallowable under Section 40(a)(i) - Held that:- the tax withholding liability has been discharged by the assessee as and when the activation of key has taken place. This approach is legally correct because activation of the end product is the trigger to royalty accruing to the vendors and as such to the income in the hands, if taxable, being brought to tax in India. The approach of the assessee thus cannot be faulted with. In view of the above discussions and bearing in mind entirety of the case, we see merits in the plea of the assessee. The impugned disallowance of under section 40(a)(i), as rightly contended by the learned Counsel, is devoid of legally sustainable merits and must be, therefore, deleted. Accordingly, we direct the Assessing Officer to delete the impugned disallowance made under section 40(a)(i) - decided in favour of assessee.
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