2021 (8) TMI 1359 - AT - Income Tax
TP adjustment on brand royalty computed by authorities below - HELD THAT:- As per the aforesaid provisions, consideration for transfer of rights (including granting of a licence) in respect of a trade mark or similar property or for use of a trademark or transfer of rights (including granting of a licence) in respect of any copyright, literary, artistic or scientific work, falls under the definition of ‘Royalty’ under the IT Act.
The revenue has not been able to produce any agreement to establish the payment of royalty by the associated enterprises to assessee. It is also not been established that by the use of brand “Sasken” the subsidiary associated enterprises were able to get premium price which could be ultimately translate into profits to pay royalty.
Admittedly, in the present facts of the case, assessee has registered the trademark at all the jurisdiction where the subsidiaries are located. It is also not brought on record that assessee has incurred any expenditure or contributed any money for establishment of its name in the geographical areas that benefited the associated enterprises.
Based on the above, we cannot uphold 2% royalty computed on the turnover of the AE’s by the Ld.AO/TPO.
We remand this issue back to the Ld.TPO for fresh consideration - TPO shall carry out necessary verification based on the which it must first be determined whether there is any Royalty that could be attributed. In the event Royalty is to be attributed, proper benchmarking needs to carried out the accordance with section 92CA of the Act, by selecting an authorised method and comparables. We place reliance on BEPS action plan reproduced herein above. Needless to say that proper opportunity of being heard must be granted to assessee.
Benchmarking of the international transaction between the assessee and Sasken Inc. - HELD THAT:- There is no document to show the risk assumed or that assessee had anything to do beyond mediating between Sasken Inc., and GE Ultrasound Ltd. We note that the observations of authorities below that the contract is coming because of numerous intangibles and that assessee has contributed to the intangibles along with Sasken Inc., is all assumptions in thin air without any basis. On these facts, the Ld.TPO used PSM without there being any discussion about the comparables chosen and whether they were acceptable or not to the assessee. Such action by Ld.TPO cannot be approved as it is not in accordance with the Rule 10(1)(d) of Income-tax Rules. We therefore remand this issue back to the Ld.AO/TPO for carrying out the benchmarking of the international transaction between the assessee and Sasken Inc., in accordance with law to determine if the price changed by assessee to be a facilitator is at arms length.
Disallowance of deduction u/s 10 AA - We direct the Ld. AO to compute deduction under section 10 AA of the act in accordance with the ratio laid down by Hon’ble Supreme Court in case of Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT]
Disallowances made u/s 14A and MAT credit not granted in respect of taxes paid outside India under section 90/90A - HELD THAT:- AO has not considered the submissions of assessee before computing the disallowance in the hands of assessee on these issues alleged. Accordingly we deem it fit and proper to remand this issue back to the AO. AO is directed to verify all the details filed by assessee and to consider the claim in accordance with law.