TMI Blog2009 (8) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... as made in complete disregard of the order of the 'Transfer Pricing Officer' ('TPO') issued under section 92CA(3) of the Act wherein the royalty paid has been held to be at arm's length- Held that:- royalty payment having been accepted by the TPO as arms' length payment, there was no justification on the part of the learned CIT(A) to hold that the same was unreasonable and the AO was justified in making the disallowance out of the same by invoking the provisions of Section 40A(2)(b), assessee's appeal allowed. Provisions of section 92CA(4) of the Act - Assessing Officer is required to compute the total income of the assessee having regard to the arm's length price determined by the TPO - Held that:- TPO has accepted the price determined by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual sales price, was unreasonable even though payment of royalty at rates up to 30 per cent of IPP was a prescribed criterion for automatic approval by the Reserve Bank of India. 1.5 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance which was made in complete disregard of the order of the 'Transfer Pricing Officer' ('TPO') issued under section 92CA(3) of the Act wherein the royalty paid to Oracle Corporation, USA has been held to be at arm's length. 1.6 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the arm's length consideration as determined by the TPO was not in accordance with the provision of section 92C(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be reproduced herein for ready reference. The same reads as under: "Section 92: Where a business is carried on between a resident and a non-resident and it appears to the Assessing Officer that owing to the close connection between them, the course of business is so arranged that the business transacted between them produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the Assessing Officer shall determined the amount of profits which may reasonably be deemed to have been derived therefrom and include such amount in the total income of the resident." 12. From the above, it is seen that the pre-conditions for invoking provisions of section 92 is that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee declared by it as per return of income. We, therefore, decide this issue in favour of the assessee by respectfully following the precedents. The contentions of learned DR of the revenue are devoid of merit in the absence of a comparable case to show that the profits of the assessee in the present case is less than ordinary profit.' 5. Besides the decision of the Tribunal in assessee's own case as rendered above for AY 1999-2000, 2000-01 2001-02 which squarely covers this issue in favour of the assessee, it is observed that the royalty paid amounting to Rs. 70.60 crores by the assessee company to Oracle Corporation, USA for duplication and distribution of software was held to be at arms' length by the TPO as per his order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of consideration was held to be essential special requirement of the provision. There is no such requirement of establishment of "tax evasion" before initiation of proceedings for determination of Arm's length price as discussed above. Contrary view held by the ld. CIT (Appeals) is accordingly held to be unsustainable. 18. Before parting with this issue, we would like to deal with another contention of the Learned Counsel for the assessee that where any payment is made in respect of an expenditure which is excessive or unreasonable having regard to the fair market value of goods, services or facilities to the concern in which assessee has substantial interest, the disallowance is permissible under section 40A of the Act which override ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted before us that income of the assessee is exempt under section 10A of the Act and, therefore, the over-pricing or under-pricing of an international transaction would not affect the computation of income. This argument is without force in view of the specific provisions contained in the first proviso to sub-section (4) of section 92C wherein it has been clearly stated that no deduction under section 10A/10AA or section 10B or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this section. 21. It is abundantly clear that Legislature while introducing the enactment did comprehend a situation requiring investigation and addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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