Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (3) TMI 29 - AT - Income TaxTransfer pricing adjustment - international transaction relating to acquisition of intangible assets by assessee from its associated enterprise - Held that:- The authoritative pronouncement by the Hon'ble High Court in Vodafone India Services Pvt. Ltd case [2014 (10) TMI 278 - BOMBAY HIGH COURT] clearly brings out that the mechanism of measurement of income by application of arm’s length principle prescribed in Chapter X of the Act can be invoked only “where income arises from international transaction”. Applying the aforesaid ratio to the instant facts, it is quite clear that the consideration paid for acquisition of Goodwill and Customer lists has not been considered while computing the taxable income and, therefore, the same cannot be subject to application of arm’s length principle contained in Chapter X of the Act. Therefore, so far as the stand of Revenue qua the adjustment made on account of cost of acquisition of Goodwill and Customer lists is concerned, the same is hereby directed to be deleted. Adjustment made in the cost of acquisition of Trademark - the plea of assessee has been that the valuation has been carried out by an expert and the weightage has been assigned on the basis of variety of considerations, inter-alia, including the potential of generating business in future - Held that:- In our considered opinion, the assessee has explained the basis of arriving at the consideration and the basis is not alien to the theories of valuation. So however, in contrast, if we were to examine the stand of TPO, same is quite adhoc and unscientific, and is only a guesstimate. The TPO observed that “assessee has paid almost 25% extra” for the acquisition, which is devoid of any rationale or scientific methodology. Therefore, in our considered opinion, the TPO has not rejected the valuation of assessee on the basis of any objective reasoning. At the time of hearing, the learned representative also pointed out that the result of valuation carried out by TPO is minimal inasmuch as it would result in the reduction in claim of depreciation by a sum of ₹ 2,32,874/-, which is quite insignificant. Be that as it may, after having considered the entire conspectus of facts and circumstances of the case, we do not find any justification to approve the approach of TPO to compute the arm’s length price of the transaction of acquisition of Trademark as it is neither scientific and nor it is in the manner prescribed in the statute. Therefore, with respect to the adjustment made on account of cost of acquisition of Trademark, the Assessing Officer is directed to delete the addition. Thus, transfer pricing adjustment made on account of international transaction relating to acquisition of intangible asset is hereby directed to be deleted and assessee accordingly succeeds.
|