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2023 (9) TMI 596 - AT - Income TaxTP Adjustment - determination of the arm’s-length price with respect to royalty paid by the assessee on carcass trade carbon black - HELD THAT:- We are of the view that for benchmarking the royalty transaction the database of royalty source is correctly used by the assessee but the comparables are not shown before us. While adopting the most appropriate method in case of such transaction, the factors such as the nature of the relevant intangibles, difficulty of identifying comparable uncontrolled transaction and intangibles and further difficulty of applying certain transfer pricing methods should be of paramount importance. Assessee has used Royalty sources database that is required to be used or it may use any other royalty database, the assessee should make a search of the comparable royalty agreements with respect to the timing, tenure, geographical location of the parties, relevant terms and conditions of the agreement, justification for increasing it by 2% and consequent increase in the functional liability of the recipient party etc. and submit before the learned transfer pricing officer for examining the arm’s-length price. The first onus lies on the assessee to submit that the international transactions of the payment of royalty at the rate of 5% on carcass grade carbon black is arm’s-length. Accordingly, we set-aside all the grounds of appeal of the assessee with respect to the benchmarking of international transaction back to the file of the learned assessing officer where the assessee would be benchmarking the transaction by adopting the cup method as held above. The learned AO/TPO may examine the benchmarking and decide the issue afresh. In the result, ground number 1 – 7 of the appeal for assessment year 2006 – 07 are allowed with above directions. TP Adjustment - holding that the arm’s-length price of the royalty incurred is Rs nil - As for the similar reasons, with respect to the carcass grade carbon black royalty paid at the rate of 5%, we have set-aside the issue back to the file of the learned TPO/AO with direction to the assessee to benchmarked the above transaction by adopting the most appropriate method as CUP for establishing that those transactions are at arm’s-length price for AY 2006-07 and 2007-08, with similar direction, for this year also, for Royalty payments for both grades of carbon black, where the learned TPO has challenged also with respect to the absence of any new technology for increase in the royalty rates, we set-aside this issue to the TPO, directing assessee to establish by the contemporaneous documents that the international transaction is at arm’s-length of royalty payment. Ld TPO may examine the same and determine the arm’s-length price. Accordingly ground number 5, 6 and 7 of the appeal are allowed with above direction. Unutilized cenvat credit against addition u/s 145A - It is the claim of the assessee that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee’s own case for assessment year 2001 – 02, 2002 – 03 and also confirmed by the honourable Bombay High Court for assessment year 2002-03 [2009 (10) TMI 656 - BOMBAY HIGH COURT] - HELD THAT:- We direct the learned assessing officer to delete the addition made by invoking provisions of section 145A. Allowance of brought forward losses from earlier years - HELD THAT:- After hearing the parties, we set-aside the issue back to the file of the learned assessing officer with a direction to assessee to submit before the learned assessing officer the chart of allowability of carry forward of depreciation and business losses, AO may examine the same and if it is found in accordance with the law, grant same. Accordingly ground number 8 and additional ground of appeal are allowed with above direction. Claim of depreciation on fixed assets viz that the assessee company has reduced from different block of assets - DRP following the decision of the honourable jurisdictional Bombay High Court in case of Sonic Biochem And Extractions Private Limited [2015 (12) TMI 112 - BOMBAY HIGH COURT] allowed the claim of the assessee - HELD THAT:- We find that the learned dispute resolution panel has followed the decision of the honourable Bombay High Court. The learned departmental representative could not show us any reason that why the decision of the honourable Bombay High Court is not applicable in the facts of the case. In view of this, we do not find any infirmity in the direction of the learned dispute resolution panel and dismiss the solitary ground of appeal.
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