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2010 (1) TMI 614 - AT - Income TaxArm’s length Price - Disallowance of royalty - The assessee-company is a 100% subsidiary company incorporated in 1998 under the Indian Companies Act, which is one of the subsidiaries of Computer Associates International Inc USA - As the company had written off huge bad debts, the company should have asked for a waiver of royalty corresponding to such write off, any independent entity, who is just distributor of the products, could have asked for such waiver, irrespective of the agreement provisions - The Learned Counsel took us thorough the TPO's order passed u/s 92CA(3) and argued that write off of the bad debts cannot be the subject matter for determining the ALP so as to power of the TPO is concerned - After examining the parameters prescribed in Rule 10B, it can be seen that bad debts written off cannot be factor to determine the arm's length price of any international transaction – Accordingly AO has directed to adopt the Arms Length Price of the royalty payable to CA Inc Management, USA as declared by the assessee in both the years Interest - This issue stands covered in favour of the assessee by the decision In the case of Ekata Promoters (2008 -TMI - 65270 - ITAT DELHI) - As admittedly, the assessment year involved is 2003-04 and section 234D is brought under statue book from assessment year 2004-05 - AO directed not to levy interest u/s 234D.
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