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2017 (1) TMI 389 - HC - Income TaxSegregation of the transaction including inter alia royalty and fee for technical services - TPA - Held that:- There can be no strait jacket or inviolable rule in this regard. The recent judgment of this Court in Sony Ericsson Mobile Communication India (P) Ltd. vs Commissioner of Income Tax (2015 (3) TMI 580 - DELHI HIGH COURT) stated that aggregation of such transaction is permissible and relied upon the OECD Commentary in this regard. At the same time the observations are not in fact determinative or conclusive. The Court was careful to leave the issue open for examination having regard to the facts of each case. In other words, as to whether the assessee’s claime that aggregation is essential in a given case is an entirely fact dependent exercise to be viewed having regard to the nature of the transaction and the surrounding circumstances. The assessee contends that the amounts paid under the royalty license and technical support agreements had to be viewed along with all other expenses and, therefore, aggregated. The Revenue’s contention, however, is to the contrary. The entire issue as to whether aggregation is warranted in the circumstances, should be gone into afresh in view of the law declared in Sony Ericsson (supra) and clarified in Magneti Marelli (2016 (11) TMI 123 - DELHI HIGH COURT) wherein held if the transactions are, in the opinion of the TPO, not at arm's length, the required adjustment has to be made, as provided in the Act, irrespective of the fact that the expenditure is allowable under other provisions of the Act. There can conceivably be various reasons not to subject such payments, such as for instance, if no similar data exists at all; or that sectional data for such payments is absent. Quite possibly, this may also be a general pattern of expenditure which AEs may insist to part with technology; further, similarly, other models of payment- deferred or lump sum, along with royalty or inclusive of it, may be discerned in comparable transactions. As far as the issue of most appropriate method is concerned, this Court is of the opinion that no definitive ruling ought to be given at this stage. As to whether in the event of de-segregation the CUP method is the most appropriate rather than TNM method should in our opinion be left open for consideration depending on the determination of the issue of aggregation/ de-segregation itself. In other words, that whether in the event of de-segregation, which would be the appropriate method, should be left to the TPO to decide, after hearing counsel for the parties. However, we clarify that in the event it is held that aggregation is permissible in the facts of this case, the findings of the Revenue authorities and the Tribunal that the TNMM method was warranted, would not be disturbed.
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