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2017 (12) TMI 48 - AT - Income TaxTransfer pricing addition in respect of international transaction of payment of Royalty - ALP - deductibility or otherwise of such a payment in terms of section 37(1) - Held that:- TPO proposed the transfer pricing adjustment equal to the stated value of transaction of royalty payment with Nil ALP by holding that no benefit etc. was received by the assessee because of the intra-group services received by it and hence no payment on this account was warranted. The AO in his draft order has taken ALP of this international transaction at Nil on the basis of recommendation of the TPO without carrying out any independent investigation as to the deductibility or otherwise of such a payment in terms of section 37(1) of the Act. This addition has been made by the AO in his final assessment order giving effect to the direction given by the DRP and not by invoking section 37(1) of the Act. As the TPO in the instant case initially determined Nil ALP by holding that no benefit etc. accrued to the assessee because of Royalty payment and the AO made the addition without examining the applicability of section 37(1) of the Act, we find the actions of the AO/TPO running in contradiction to the ratio laid down in Cushman & Wakefield (2014 (5) TMI 897 - DELHI HIGH COURT ). Respectfully following the precedent, we set aside the impugned order and remit the matter to the file of AO/TPO for deciding this issue - Decided in favour of assessee for statistical purposes.
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