Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Sara Lee TTK Ltd. (Formerly known as Sara Lee Household and Body Care India Ltd., now amalgamated into Godrej Consumer Products Ltd.) Versus DCIT Range-10 (2) , Mumbai

2016 (9) TMI 907 - ITAT MUMBAI

Royalty payable to the Associated Enterprise - whether was to be restricted to 1 % of the qualifying Net Sales as against the rate of 50/0 of the qualifying et Sales as computed by the appellant - TPA - Held that:- From the record we found that the assessee did not bench mark the royalty payment separately. On enquiry by TPO, it has relied on RBI approval given in 1995 and also on the fact that the assessee earned a gross profit of 41.6%. TPO applied Press Note 9(2000 series) and restricted it t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lant has to independently benchmark its international transaction with independent comparables so as to arrive at arm's length price, which has not been made in this case. The comparability analysis is the substratum of determining the ALP, which has not been done by assessee at any stage. At the very same time we found that the revenue authorities have not properly appreciated the relevant clauses of the trademark licence agreement, precisely the clauses which were highlighted by ld. AR during .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rposes. - ITA No. 376/Mum/2012 - Dated:- 24-8-2016 - Shri R. C. Sharma, AM And Shri Amit Shukla, JM Assessee by : Shri F.V.Irani, Ms.Sonali Godbole Revenue by :Shri N.K.Chand, Shri Peeyush Sonkar ORDER Per R. C. Sharma ( A. M ) This appeal is preferred by the assessee against the order of the Ld. CIT(A)-15, Mumbai dated 9-11-2011 pertaining to assessment year 2007-08, in the matter of order passed u/s.143(3) of I.T.Act. 2. The assessee-company is engaged in the business of manufacture and sale o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

artment of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce & Industry for extension of their approval for a period of 5 years from 06.06.2002 to 05.6.2007.It approved it with certain terms and conditions on 28.7.2003. Thereafter, the assessee entered into a Trademark License Agreement with Buttress B.V. Netherlands dt. 17.12.2003 w.e.f. 01.7.2012 and then sought an amendment from the DIPP, which gave the foreign technical collaboration approval on 23.4.2004 with certain .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f trademark without transfer of technology. On an appeal to the CIT(A)-15, Mumbai, the Ld. CIT(A) noticed that the assessee has not carried out any bench mark analysis for the payment of royalty towards the use of trademark with similar business segment as that of the assessee and it has also not analysed. In view of that the Ld. CIT(A) required the appellant to give comparable license agreements. From the copies of agreement furnished by the assessee, the Ld. CIT(A) noted that facts such as tra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

License Agreement between the assessee and its AE and the approval letter of the DIPP, the CIT(A), inter alia, found that the licensor has specifically allowed licensee to use trade mark for manufacturing, packing, sale a d distribution of these products in the territory and the DIPP a approval is for the purpose of manufacturing / packing, sale and distribution of these products in the territory and the DIPP and the royalty rate approved @5% is for internal sales as well as export sales subject .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of royalty approved by DIPP is towards collaboration/ manufacturing/technical knowhow agreement towards which the RBI permitted royalty @ 5% of net sales on domestic sales and 8% on net sales on export sales under automatic route and hence those approvals cannot be considered as a benchmark towards royalty for the use of trademark/brand. In the facts and circumstances, the Ld. CIT(A) considered that the prevailing rate of royalty for use of brand or trade mark would be the rate prescribed by th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng et Sales as computed by the appellant. 2) Without prejudice to the above grounds, the appellant submits that the Transfer Pricing adjustment is excessive and ought to be deleted or reduced substantially. " 4. Based on certain clauses of the agreement dated 17.12.2003 and the approval of the RBI, the Learned AR appearing on behalf of the appellant has contended that the agreement is a mere extension of the original agreement of 1995 and hence the royalty payment cannot be regarded as bein .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n in Para III has no application. The Ld. AR further submitted there is an error in the computation of the disallowance. 5. With respect to objection of revenue that there has been no benchmarking done by the assessee company. it was submitted by ld. AR that the assessee company has obtained specific approval from RBI permitting payment of royalty @5% and hence the Department and assessee have both relied on Government Approval for benchmarking. With regard to the objection taken by TPO in respe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ement is not for transfer of technical knowhow but only for trademark license, ld. AR submitted that the new agreement is for transfer of technical knowhow and not merely for use of trademark, as it is a mere extension of the original agreement. 7. With regard to objection that the Government approval is not relevant for transfer pricing purpose, the contention of ld. AR was that the TPO/CIT(A) have themselves benchmarked the transaction with Press Note 9 (2000), whereas the assessee company has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ld. AR that the collaboration agreement was for manufacturing and not confined to use of trademark. It was submitted that the new agreement is for transfer of technical knowhow and not merely for use of trademark which is evident from the new agreement dated 17.12.2003. 9. With regard to revenue s contention that the RBI approval/FIBP approval was not determinative of ELP, it was contended that the TPO and CIT(A) have themselves benchmarked the transaction with Press Note 9 (2000) series. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Ld. CIT DR relying on the Ld.CIT(A) order, the title and certain clauses of the new agreement has contended that the payment is towards the use of trademarks / brand only. Relying on the decision of the Hon'ble Delhi High Court in the case of Nestle India Ltd, the Hon'ble P & H High court decision reported in 177 Taxmann 103 , the Hon'ble ITAT Del decision in 37 SOT 358 Del in Perot systems TSI (India) Ltd etc, the DR contended that the RBI's approval is in connection with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or the use of trademark BRYLCREEM . As per ld. DR Clause 3, 4 and 5 are for the protection of Trademark as the licensor wants to secure it s reputation and to ensure that the products meet the specification and quality desired by the Licensor. The contention of ld. DR was that the reliance on RBI approval is also misplaced as that approval is for collaboration only. There is not a single evidence on record to prove that there is any know how transfer under TRADEMARK LICENCE AGREEMENT'. As pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Autocomp Systems Ltd., ITA No. 774 & 1508/M/2014 dt. 18/11/2015. 12. We have considered the rival submissions and perused the relevant finding given in the impugned orders. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by ld. AR and DR during the course of hearing before us, in the context of factual matrix of the case. From the record we found that the assessee did not bench mark the royalty payment separatel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the assessee to prove that the transactions were taken at arm's length. Royalty is a separate international transaction, for this purpose, reliance can be placed on the decision of Punjab & Haryana High Court in the case of Knorr-Bremse India (P) Ltd., ITA No.182 of 2013. The RBI approval/FIPB approval is not determinative of ALP and cannot be considered to be a valid CUP. Automatic route under which FIPB approvals or RBI approvals are granted have been devised for the "ease of d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version