TMI Blog2013 (5) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... ustification. Even on merit, no addition was required as assessee was manufacturing specific products as per specification of the principal and selling the same to principal and to other parties. The royalty was payable as per agreement for using of technical know-how on value added price to the principal as independent of manufacturing of goods. Further, royalty had been paid not on entire sale price but only value added price which was worked out separately. The royalty had also been paid on sale to third parties which had been allowed but royalty on sales to AE had not been allowed when rate of royalty was the same. Further, no disallowance had been made in the earlier year. Thus held by the Tribunal that the royalty was thus for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h manufacture had to be obtained as expressly approved by the principal. The TPO also observed that the assessee had no option regarding purchases, manufacturing process and sales which had to be made only to the approved parties. The TPO also noted that in the transfer pricing study, the assessee itself had stated that the activities of the assessee were in the nature of contract manufacturing. Since it was a case of contract manufacturing, the TPO held that no royalty was payable and, therefore, determined arms-length -price of royalty at nil and recommended adjustment of Rs.58,09,820/- as there was no justification for payment of royalty to the principal. The AO following the order of TPO made an addition of Rs.58,09,820/- . 3. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is in appeal before the Tribunal. 4. Before us the ld. AR for the assessee submitted that the same issue had been considered by the Tribunal in assessee's own case in assessment years 2003-04 and 2004-05 in ITA Nos.2057 and 2058/Mum/2009 in which adjustment made on account of similar royalty paid by the assessee on basis of the same agreement had been deleted by the Tribunal. The ld. DR on the other hand placed reliance on the orders of authorities below. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding transfer pricing adjustment made by the AO on account of payment of royalty to the principal who was an associate enterprise (AE). We find that the same issue has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s material for manufacture of the specified products. The Tribunal further noted that the royalty was payable as per agreement for using of technical know-how on value added price to the principal. Thus royalty payment was independent of manufacturing of goods. Further, royalty had been paid not on entire sale price but only value added price which was worked out separately. The royalty had also been paid on sale to third parties which had been allowed but royalty on sales to AE had not been allowed when rate of royalty was the same. Further, no disallowance had been made in the earlier year. It was thus held by the Tribunal that the royalty was thus for the purpose of business. The Tribunal accordingly, deleted the addition on merit also. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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