2024 (2) TMI 290 - AT - Income Tax

TP Adjustment - Separate Benchmarking of Royalty - HELD THAT - We note that this issue is covered by the decision of the coordinate Bench of this Tribunal in assessee own case for the for AY 2012-13 2014-15 2023 (2) TMI 1106 - ITAT BANGALORE thus we hold that no separate benchmarking of royalty payment is required and this issue is decided in favour of the assessee.

Summary

Issues Involved:
Cross-appeals by assessee and revenue against separate Orders of CIT(Appeals) for AYs 2015-16 & 2016-17.

Issue 1: Separate Benchmarking of Royalty

The assessee contended that royalty payment is part of operating cost and should not be separately benchmarked. Citing precedent cases, the assessee argued against the separate benchmarking of royalty. The Tribunal referred to a previous decision in the assessee's favor for AY 2012-13 & 2014-15, where it was held that royalty payment should not be separately benchmarked. As the TNMM approach was adopted at the entity level, including royalty, no separate adjustment was deemed necessary. Consequently, ground No.3 was allowed, rendering grounds 4 to 9 on ALP computation of royalty academic.

Issue 2: Departmental Appeals

The revenue raised a common ground questioning the characterization of testing expenses as R&D expenses without verifying the nature of expenses. However, since the assessee's appeals were allowed regarding the benchmarking of royalty payments, this issue became academic and did not require separate consideration.

In conclusion, the Tribunal partly allowed the assessee's appeals and dismissed the department's appeals, emphasizing the decision on royalty benchmarking. The judgment was pronounced on December 21, 2023.