TMI Blog2017 (1) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, as to whether the assessee’s claime that aggregation is essential in a given case is an entirely fact dependent exercise to be viewed having regard to the nature of the transaction and the surrounding circumstances. The assessee contends that the amounts paid under the royalty license and technical support agreements had to be viewed along with all other expenses and, therefore, aggregated. The Revenue’s contention, however, is to the contrary. The entire issue as to whether aggregation is warranted in the circumstances, should be gone into afresh in view of the law declared in Sony Ericsson (supra) and clarified in Magneti Marelli (2016 (11) TMI 123 - DELHI HIGH COURT) wherein held if the transactions are, in the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MR. NAJMI WAZIRI JJ. Appellant Through: Ms. Prem Lata Bansal, Sr. Adv. with Mr. Paras Chaudhary, Adv. Respondent Through: Mr. Dileep Shivpuri, Mr. Sanjay Kumar and Mr. Vikrant A. Maheshwari, Advs. O R D E R 1. Issue notice. 2. Mr. Dileep Shivpuri accepts notice for the respondent. With consent, the appeal is taken up for disposal. 3. The question of law sought to be urged in this appeal by the assessee is: whether the Income Tax Appellate Tribunal (in short the Tribunal) was right in holding that segregation of the transaction including inter alia royalty and fee for technical services, was not permissible in the circumstances of the case. 4. The facts necessary for disposal of this appeal, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60A of the Income Tax Act 1961(in short the Act). 6. It is urged by Ms. Bansal, the learned senior counsel, that two agreements and the amounts paid thereunder were part of a composite understanding between the parties i.e. the licensor on the one hand and the assessee on the other. It was a commercial compulsion which drove the assessee to accept the terms of this agreement. In the circumstances, the Revenue s action in desegregating a part or a component of the package and subjecting it to a separate method, to arrive at the ALP i.e. the CUP method was inappropriate. The learned counsel highlighted that so far as the other transactions were concerned, the AO accepted the application of the Transactional Net Margin (TNM) method. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Magneti Marelli Powertrain India Pvt. Ltd. vs Deputy Commissioner of Income Tax (2016) 290 CTR (Del) 60, this Court had observed after noticing the judgment in Sony Ericsson (supra) as well as in the Commissioner of Income Tax vs. EKL Appliances Ltd. (2012) 345 ITR 241 (Del), and observed as follows: .....14. The assessee/appellant during 2008-09 entered into four License Technology Assistance Agreements (LTAAs) with its overseas AE for four products for obtaining ECU technology. In return for the technical know-how, the assessee agreed to compensate the AE through a fee amounting to US $ 2 million for each LTAA (total US$ 8 million equivalent to over ₹ 38 crores) on installment basis. It explained that the oversea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees argument that the technology itself would not have been given to it, but for the substantial fee (paid over and above the royalty payable), in the opinion of this court, requires a closer scrutiny. The initial burden is always upon the assessee to prove that the international transaction was at Arms Length. Its TP report necessarily had to draw a comparison with other entities (maybe competitors) to show the general degree of profitability of the venture in question. The lower authorities quite correctly turned down the method of explaining the justification of the technical fee-with proof of its necessity by relying on profits. Undoubtedly the assessee was obliged to make the payment and that obligation arose from the agreements, a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nswered against the assessee. The remit directed by the impugned order is, therefore, upheld. 10. In the light of the above discussion, it is held that the entire issue as to whether aggregation is warranted in the circumstances, should be gone into afresh in view of the law declared in Sony Ericsson (supra) and clarified in Magneti Marelli (supra) above. 11. As far as the issue of most appropriate method is concerned, this Court is of the opinion that no definitive ruling ought to be given at this stage. As to whether in the event of de-segregation the CUP method is the most appropriate rather than TNM method should in our opinion be left open for consideration depending on the determination of the issue of aggregation/ de-segr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
