Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (6) TMI 123 - AT - Income TaxTransfer pricing adjustment - international transaction of 'Payment of royalty’ - whether no addition on account of transfer pricing adjustment is permissible as the AO has not made any disallowance u/s 37(1)? - Whether application of the TNMM on entity level should be upheld covering the international transaction of payment of royalty? - MAM - Held that:- Coming to the determination of ALP of this international transaction under the CUP method, we find that the assessee chose three companies as comparable, which, in our considered opinion, have been rightly rejected by the TPO on several cogent reasons tabulated vide para 14 of his order including difference in type of technology and different geographical locations inasmuch as both the payers and payees were foreign parties. However, the fact remains that if the assessee’s comparables are not correct and the assessee is not forthcoming with a new set of comparables, then, it becomes the duty of the TPO to find out relevant comparables and proceed to determine the ALP accordingly. Coming back to the TPO’s opinion about nil ALP of the payment of royalty, we find that the DRP has accepted the marginal use of technical know-how by the assessee from its AE, for which it directed to adopt 0.25% on sales as the ALP of royalty payment in respect of this model. It is this ad hoc approach of the DRP which has been turned down by the Tribunal for the earlier years leading to the restoration of the matter to the file of AO/TPO for a fresh determination of the ALP of this transaction by using the transaction by transaction approach, which the assessee has done for this year by applying the CUP method in respect of the international transaction of payment of royalty. As the facts and circumstances for the instant year continue to remain similar vis-à-vis the preceding years, respectfully following the precedent, we set aside the impugned order and remit the matter to the AO/TPO for a fresh determination of the ALP of the international transaction of 'Payment of royalty’ for model 3DX by applying the CUP method after affording a reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes.
|