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2019 (7) TMI 923 - AT - Income TaxTP Adjustment - MAM selection -ALP of the royalty paid AE - assessee has benchmarked the payment of royalty by applying CPM - DR arguing in favour of applicability of CUP submitted that since the assessee failed to furnish rates at which royalty was paid by other group entities, TPO determined the arm's length price at nil - HELD THAT:- The aforesaid argument of the learned DR is unacceptable simply for the reason that the Transfer Pricing Officer could not have determined the arm's length price under CUP by applying the rate of royalty paid by other group entities since they are controlled transactions. Whereas, rule 10B(1)(a) mandates that the price charged for an uncontrolled transaction / transaction should be considered as a CUP. As regards the justifiability of payment of royalty qua RBI/SIA approvals, we must observe that in the decisions cited by the learned AR, the Tribunal has held that the rate at which payment of royalty was approved by the RBI/SIA can be considered as arm's length price. In the case of A.W.Faber Castell India Pvt. Ltd. [2017 (4) TMI 1011 - ITAT MUMBAI] cited by the learned DR, though, the Tribunal has observed that arm's length price of royalty needs to be determined in accordance with the Transfer Pricing regulations, however, the bench also observed that if an authority by way of specific approval has allowed a particular rate of payment, it does carry persuasive value and can act as one of the supportive tools for carrying out benchmarking of transaction relating to payment of royalty. Insofar as the decision of the Tribunal in Skol Breweries [2013 (1) TMI 623 - ITAT MUMBAI] cited by the learned DR, we must observe that the Tribunal has observed that press note of Ministry of Commerce fixing rate of royalty under FDI policy cannot be considered to be relevant for determination of arm's length price under the Act. Thus following the well settled proposition of law that the view favourable to the assessee has to be taken, we are inclined to follow the decisions cited by the learned AR holding that the determination of arm's length price as approved by the RBI/SIA is valid. On the basis of the aforesaid reasoning, we uphold the decision of the learned Commissioner (Appeals) in deleting the addition made on account of transfer pricing adjustment. - Decided against revenue
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