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2017 (5) TMI 1358 - AT - Income TaxALP adjustment in respect of royalty payment made - MAM selected - Held that:- TPO had not applied TNMM at entity level. The TP study report submitted by the assessee company had been rejected by the TPO. This action of the TPO is confirmed by the Hon’ble DRP. But the TPO proceeded to bench mark the transaction of the royalty payment on stand alone basis. In the process, the cost of production or other transactions are not subjected to bench marking by the TPO. Therefore the contention of the ld. counsel that when the TNMM was applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted. This submission made by the assessee-company is factually incorrect. On mere perusal of order of the ld. TPO it is manifest that the TPO had picked up the transaction royalty alone for the purpose of bench marking. The statement made by the ld. Counsel for the appellant is nothing but attempt to mislead the court. This conduct on the part of the counsel is highly deplorable. Ld. counsel chosen not to point out any fallacies in the reasoning of the TPO or of the ALP analysis in the working of the ALP adjustment. The ld. counsel also failed to establish that the transaction royalty payment is closely linked with the other transactions carried out with AE. It is trite law that a justification should be shown for clubbing the transactions. In the absence of such justification clubbing other transactions is not possible. The onus always lies on the assessee-company to establish the justification for clubbing and aggregation of the transaction of payment of royalty with other transactions. As mentioned (supra) the assessee-company had failed to discharge such onus, in the circumstances we confirm the orders of the lower authorities in this respect of ALP adjustment on payment of royalty. - Decided against assessee. Deduction u/s 10A - reduction of the expenditure incurred under telecommunication freight and travelling incurred in foreign currency from export turnover - Held that:- This issue is covered in favour of the assessee-company by the decision of the jurisdictional High court in case of Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ]. Respectfully following the decision of the order we direct the AO / TPO to exclude the expenditure from both export turnover and total turnover. These grounds of the appeal are allowed.
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