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2017 (12) TMI 1404 - AT - Income TaxAdjustment on royalty payment - Held that:- The royalty payment by the assessee in all the preceding years from assessment years 1997-98 to 2002-03 have been allowed and no adjustment has been made on account of arm's length price of international transactions, which arises from June, 1996 i.e. 04.06.1996. Further, the Revenue has failed to bring on record any evidence to show that there was any change in facts and in the absence of the same, no adjustment is warranted in the instant assessment year. Further the two parties were independent at the time of signing the agreement for payment of royalty and where payment of royalty was pursuant to such an agreement between independent entities and not associated enterprises; and where the concern become associated enterprise in a later period and where the price paid to associated enterprises was the same as entered when it was an independent entity, then the same has to be considered as uncontrolled transaction. Such was the proposition laid down by the Mumbai Bench of Tribunal in Addl. Director of Income Tax (IT) Vs. Ballast Nedam Dredging (2013 (1) TMI 830 - ITAT MUMBAI). Applying the said principle, we hold that on this count also, there is no merit in making any adjustment on account of the international transactions of payment of royalty. Accordingly, we hold that there is no merit in the order of TPO/Assessing Officer in holding the arm's length price of international transactions of payment of royalty at Nil. Coming to the second aspect of the issue, where the assessee was making payment of royalty to its associated enterprises at the rates which have been approved by the RBI. We find that the Hon’ble Bombay High Court in CIT Vs. SGS India (P.) Ltd. [2015 (11) TMI 1619 - BOMBAY HIGH COURT] had held that rate of royalty approved by SIA/RBI would constitute CUP data and the transaction would be at arm's length price.In the facts of present case, where the assessee has paid royalty to its associated enterprises as per the rates which were approved by RBI, which is not in dispute, then the said transaction would be at arm's length price. Accordingly, we hold that no addition is warranted on this count under Transfer Pricing provisions. Accordingly, we hold so. International transactions of payment of royalty is to be accepted at arm's length price and we reverse the order of TPO/Assessing Officer in holding the value of international transactions at Nil. The findings of CIT(A) are reversed but claim of assessee is allowed on other grounds. Thus, the grounds of appeal raised by the Revenue are dismissed.
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