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2018 (7) TMI 2328 - AT - Income TaxTP Adjustment - royalty payment made to associate enterprise - Nil ALP determined - HELD THAT:- As decided in own case [2018 (6) TMI 1843 - ITAT KOLKATA] the lower authorities have been very fair in not holding the assessee’s royalty transactions to be a sham ones. They have applied benefit and commercial expediency test in the instant case whilst computing nil ALP. We see no reason to approve the same these two tests of benefits and commercial expediency are not to be invoked as per the above legal position. The impugned action of the lower authorities under challenge is therefore held to be not sustainable. Quantification impugned ALP - TPO admittedly applied ‘CUP' method in his order (supra). He appears to have treated the tax payer itself as a valid comparable as it had not paid any royalty to the very payee in earlier assessment years. This made him to adopt nil price of the impugned royalty so as to make the adjustment in question. No reason to concur with such a course of action since the assessee itself having paid Nil amount in the past to the AE, cannot be taken as a valid comparable. This tribunal in the case of Technimont ICB India (P) Ltd. [2013 (9) TMI 595 - ITAT MUMBAI] has concluded long back that a transaction between payee and its AE is not an uncontrolled one so as to be taken as a comparable. We accept the assessee’s instant first substantive ground both on legality as well as on quantification therefore. The impugned ALP adjustment stands deleted accordingly. Disallowing provision for leave encashment u/s 43B(f) - HELD THAT:- This issue deserves to be remitted back to the Assessing Officer for taking a fresh call after the hon’ble apex court’s decision in the Revenue’s special leave petition converted to appeal staying operation of hon’ble jurisdictional high court’s judgment in Exide Industries Ltd.. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] deleting identical disallowance as well as holding the statutory provision itself to be unconstitutional. We accept this fair stand and direct the AO to keep the instant issue in abeyance to be decided after the hon’ble apex court’s final verdict in the department’s appeal hereinabove. Assessee’s appeal is treated as partly allowed.
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