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Transaction is approved by the RBI and Government is not sufficient and the assessee has to benchmark the royalty payment separately

Income Tax - By: - Suraj Agrawal - Dated:- 12-10-2016 Last Replied Date:- 12-10-2016 - Case Law Citation: - Sara Lee TTK Ltd vs. DCIT (ITAT Mumbai) [ 2016 (9) TMI 907 - ITAT MUMBAI ]; ITA no. 376/Mum/2012; Date of pronouncement August 24, 2016; AY 2007-08 Brief of the Case:- The assessee did not benchmark the royalty payment separately. On enquiry by the TPO, it 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 (2 .....

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saction relating to the payment of royalty is at arm's length. However, the TPO relying on the press note 9(2000 series) dated 08.9.2000, restricted the royalty payment to 1% of domestic sale towards the use of trademark without transfer of technology. On the assessee's plea that the approval given to it by the DIPP / RBI should be taken as the benchmark, he held that the rate of royalty approved by DIPP is towards collaboration/ manufacturing/technical knowhow agreement towards which th .....

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tentions of Appellant: The agreement is a mere extension of the original agreement of 1995 and hence the royalty payment cannot be regarded as being restricted to the use of Trademark alone. He contended that Press Note 9 (2000) series relied upon by the TPO and the Ld. CIT(A), in no way supports the TPO/ Ld. CIT(A)'s restriction on rate of payment of royalty to 1% as the Para III of the Press Note, relied upon by TPO/Ld. CIT(A) relates to royalty payments made exclusively for use of tradema .....

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