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2020 (8) TMI 442 - AT - Income TaxTP Adjustment - action of AO in determining the ALP of international transactions involving Research and Development fees and Management fees at Nil without applying most appropriate method - HELD THAT:- Hon’ble High Court of Bombay in the case of Johnson & Johnson Ltd. [2017 (4) TMI 1281 - BOMBAY HIGH COURT] we find that the TPO had made transfer pricing adjustment on account of sales promotion and publicity expenses being payable by the assessee to its parent company M/s. Johnson & Johnson, USA. TPO did not follow any method prescribed u/s. 92C(1) of the Act r.w.s. 10B made adjustment. The Hon’ble High Court of Bombay was pleased to hold that the TPO is obliged under the law to determine the ALP by following any one of the prescribed methods of determining the ALP as detailed in section 92C(1) of the Act and upheld the order of Tribunal in allowing assessee’s appeal by deleting the addition made on account of sales promotion and publicity expenses. Hon’ble High Court of Bombay in the case of Merck Ltd. [2016 (8) TMI 561 - BOMBAY HIGH COURT] pleased to hold the entire transfer pricing agreement becomes unsustainable in law in not adopting one of the mandatorily prescribed methods to determine the ALP in respect of fees of technical services payable by the assessee therein to its AE. The Hon’ble High Court of Bombay held the view taken by the Tribunal in deleting the adjustment made by the TPO without applying any of the method prescribed u/s. 92C to determine ALP is a possible view. TPO has to confine himself to one of the prescribed methods for determination of the ALP of international transaction, for which mechanism has been prescribed in Rule 10B of the Income-tax Rules, 1962. Further, it held the ALP of an international transaction can be determined only by applying one of the prescribed methods given under section 92C(1) of the Act and the ALP is determined by TPO by not applying any method at all or by choosing a method which is not prescribed u/s.92C(1) of the Act, then such a determination of ALP frustrates the transfer pricing addition and deleted the transfer pricing addition made thereon by holding the methods prescribed for determining the ALP are statutory prescription, it is absolutely essential for the TPO to compute the ALP by adhering strictly to one of such methods. Thus, adjustment made in Research and Development fees and Management fees without following prescribed method under law is deleted. Granting weighted deduction u/s. 35(2AB) - HELD THAT:- Tribunal in the case of M/s. East West Seeds Ltd. [2019 (8) TMI 1524 - ITAT PUNE] wherein this Tribunal while placing reliance on the decision of Torrent Pharmaceuticals Ltd 2009 (11) TMI 819 - ITAT AHMEDABAD allowed the claim of weighted deduction u/s. 35(2AB).
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