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2015 (11) TMI 580 - AT - Income TaxTransfer pricing adjustment - determination of arm’s length price of the international transaction of sale of old machineries to the associated enterprise - Held that:- The assessee selected the CUP method in order to benchmark the sale price of the international transactions. In support, assessee also adduced the relevant CUP data, namely, valuation report from a Chartered Engineer and claimed that the sale price recovered by the asessee from its associated enterprise was commensurate with the values arrived at by the valuer. Assessee also pointed out that the invoice values have been accepted by the Indian Custom authorities also. We find that the TPO has accepted the adoption of CUP method as the most appropriate method for benchmarking the international transaction of sale of old machineries. Out of the eight transactions of such sales, the CUP data relied upon by the assessee has also been accepted by the TPO in five cases inasmuch as the sale price stated in the invoices have been accepted. It is only in three sale transactions that such CUP data has not been accepted and the TPO considered the written down value of the machineries as the arm’s length sale price. Notably, in such three transactions, assessee had suffered a loss because sale values, based on the valuer’s report, was lower than the WDV of such machineries. Quite clearly, the approach of the TPO is inconsistent. The CUP data which has been found to be acceptable in considering five transactions of sales as being in consonance with the arm’s length price, cannot be disregarded in case of other three transactions merely because of the resultant loss. In the impugned orders of the authorities below, there is no charge against the assessee that the CUP data relied upon by the assessee qua the aforestated three transactions was inconsistent or otherwise unreliable in comparison to the similar data relied upon in the context of the other five transactions. Therefore, in our view the lower authorities have mis-directed themselves in making the addition - Decided in favour of assessee. Disallowance of expenditure incurred on account of royalty - revenue v/s capital in nature - Held that:- The Tribunal in assessee’s own case for assessment year 2009-10 on similar issue decided the assessee was not to disclose to third parties any of the documents made available to the assessee without having received a written authorization from the foreign collaborator. The Tribunal held that the amount paid by the assessee under the agreement constituted revenue expenditure. The High Court concluded that the features of agreement clearly established that what was obtained by the assessee was only a licence and what was paid by the assessee to the foreign collaborator was only a licence fee and not the price for acquisition of any capital asset and, therefore, the Tribunal was right in treating the amount as revenue expenditure. - Decided in favour of assessee.
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