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2014 (6) TMI 317 - AT - Income TaxTransfer pricing adjustment – Corporate additions – Determination of Arm’s Length Price – Payment of Royalty - Held that:- The assessee is a licensed manufacturer of its products in its own right using the technology provided by the parent company i.e. Keihin of Japan - the assessee’s PLI is within the plus minus range of 5% - The PLI calculated by the TPO is OP/TC (Assessee) 6.22%, whereas PLI of the comparable calculated by the TPO is OP/TC of the comparable is 8.29% - The plus minus range of the comparable would be plus minus 8.29% i.e. from 3.29% to 13.29% and it is but obvious that the assessee’s PLI of 6.22% falls within the range - the plus minus 5% range has to be with reference to international transactions with the AE only and in view of the same as the difference between the two as calculated by TPO is 8.29% of the comparables and 6.22% of PLI of the assessee, That being within the plus minus range of 5% (3.29% to 13.29%), obviously no adjustment should have been mad – thus, the orderof the CIT(A) is upheld – Decided against Revenue. Relying upon CIT Versus EKL APPLIANCES LTD [2012 (4) TMI 346 - DELHI HIGH COURT] - the payment of running royalty is on revenue account - the Royalty was being paid from 1997 and was continuously examined by the AO, then in the absence of any new facts to hold that there was no need to pay the royalty was uncalled for – Decided against Revenue. Disallowance made u/s 40A(2)(b) of the Act – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that, various facilities such as rent, electricity, water, generator expenses and also providing manpower etc. A.O. made his own estimates and held the expenditure to excessive & unreasonable - The availing of facilities is not in dispute - this issue was decided in favor of the assessee holding that there was no excessiveness or unreasonableness qua this expenditure – there was no infirmity in the order of CIT (A) that AO has not brought any cogent material on record to come to a conclusion that this expenditure is excessive or unreasonable – Decided against Revenue.
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