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2016 (8) TMI 1351 - AT - Income TaxTransfer pricing addition - aggregation of all the international transactions including royalty for the purpose of determining the ALP - MAM selection - Held that:- In the present case the purchase and raw-material from AE consist of ₹ 123 Crores as against the total purchases of ₹ 623 Crores. The export components to the AE is only ₹ 20,89,409 which is insignificant in comparison to the total sale of the assessee. Therefore the TNMM cannot be applied as MAM for determining the ALP of royalty payment in question but we find that neither the TPO nor the assessee was able to find such uncontrolled comparable case where an identical intangible has been transferred by the party to a non-related party against the payment of royalty. Thus in such a situation the TNMM being the residual method which has to be applied as MAM for determining the ALP. We find that in a number of cases the Tribunal has taken this view by considering the peculiar facts where a comparable price is not available for the purpose of applying the CUP method. In the case on hand it was brought to our notice that the TPO has accepted the TNMM as MAM for determining the ALP in respect of the royalty payment being aggregated transaction along with the other international transactions of the assessee. Therefore keeping in view of the facts and circumstances of the case, we do concur with the view of the CIT (Appeals) on this issue. Accordingly, the appeal of the revenue is dismissed. Comparable selection criteria - functional similarity - Held that:- The assessee is engaged in the manufacturing of textiles machines for textile manufacturers in India - assessee has bench marked its international transactions on consolidated basis by considering the purchases, royalty payment, sales as composite international transactions by applying TNMM at enterprise level, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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