Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2023 (8) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (8) TMI 458 - HC - Income TaxTP Adjustment - MAM for Royalty payment - TPO has accepted the TNMM method as the most appropriate method to benchmark Assessee’s international transactions under the manufacturing activity but decided to separately benchmark the royalty - HELD THAT:- TPO having accepted that TNMM method applied by Assessee was the most appropriate method in respect of all the international transactions including payment of royalty cannot dispute application of TNMM method as the most appropriate method for the payment of royalty only for which CUP method was sought to be applied. We would concur with Appellant that having accepted the TNMM method as the most appropriate, it was not open to the TPO to subject only one element, i.e, payment of royalty, to an entirely different CUP method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction. Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both Assessee and the revenue. Tribunal was totally incorrect in saying that accepting aggregation of royalty payment with other international transactions under the manufacturing segment for the Assessment Year 2006-2007 was in the context of an earlier agreement under which the royalty was paid. TPO himself had accepted the benchmark of the international transaction of payment of royalty under the aggregation approach along with transactions of the manufacturing segment. Tribunal failed to recognize that the royalty agreement for the years under consideration was the same agreement. We have to notice that neither the TPO nor the DRP had even whispered or mentioned in their orders about any facts being different from the earlier orders. In such situation, the Tribunal was not justified in taking a different view for these three assessment orders. The Apex Court in [1991 (11) TMI 2 - SUPREME COURT]has held that in the absence of change in material facts, the department is bound by the previous decision. Once the Tribunal in its earlier orders has held that the transaction of payment of royalty for use of technology is inextricably linked with manufacturing activity and should be aggregated with other international transactions in the manufacturing segment for the purposes of benchmarking the same, and the TPO having accepted the aggregating of international transaction of payment of royalty with other international transactions in the manufacturing segment and not drawn any adverse inferences in respect of such aggregation of royalty payment under identical agreement, the Tribunal should have followed the order of the co-ordinate bench rendered under identical facts. - Decided in favour of assessee.
|