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2023 (7) TMI 1318 - AT - Income TaxTP Adjustment - MAM selection - CUP or TNMM - ALP for royalty @ 3% determined by the ld. DRP - HELD THAT:- We find that the turnover of finished goods is Rs.92 Cr. and export sales to AE was Rs.24 Cr. The import of raw material was Rs.28 Cr. Royalty has been paid on the total sales. In the specific facts of this case and export of goods to AE, the TNMM is the MAM. The ld. DRP has determined royalty payment @ 3% instead of 8% considered by the assessee, taking into consideration, the royalty payment of Federal Mogul TPR India Ltd., Climate Systems India Ltd. and Eicher Motors Ltd. The moot argument of the ld. AR was that the FAR of these companies is different. Having gone through the entire facts and circumstances of the case, we find that the arbitrary selection of royalty rate of 3% by the ld. DRP is without brining any correct comparables on record. With regard to payment of FTS in A.Y. 2012-13, the ld. DRP agreed that the TPO failed to apply CUP correctly and is determination of ALP at Nil is incorrect. The Hon’ble High Court of Delhi in Magneti Marelli [2016 (11) TMI 123 - DELHI HIGH COURT] held that if segregation approach is permissible, TNMM shall apply. Owing to these facts, the appeal of the assessee is hereby allowed.
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