TMI Blog2017 (12) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... ious years. In these circumstances, the conclusions and findings recorded by the Appellate Commissioner and the ITAT cannot be faulted. The assessee’s submission with respect to the applicability of second proviso to Section 92CA(2), i.e. that it is entitled to the benefit of the arithmetical mean – not exceeding 5%, is in our mind, insubstantial. The assessee, as a matter of fact, did not offer any adjustment claiming that there was indeed no international transaction. In these circumstances, the question of applicability of the said proviso does not arise. No substantial question of law arises - ITA 1142/2017 & CM No.45221/2017 - - - Dated:- 13-12-2017 - MR. S. RAVINDRA BHAT MR. SANJEEV SACHDEVA JJ. Petitioner Through: Mr. M.P. Rastogi with Mr. K.N. Ahuja, Advs. Respondent Through: Mr. Sanjay Kumar, Jr. Standing Counsel with Mr. Rahul Chaudhary, Sr. Standing Counsel for Revenue. S. RAVINDRA BHAT, J.(ORAL) 1. The assessee in its appeal under Section 260A urges that the findings of the lower authorities affirmed by the Income Tax Appellate Tribunal (ITAT) are erroneous. It is urged specifically that the attribution of an international transaction, is pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. As discussed supra in para 9.4, since income arising from international transaction has to be determined having regards to arm's length price, existence of agreement or otherwise is not relevant. Therefore, argument of the appellant that agreement was not in operation during period under consideration is not relevant as price of international transaction is to be determined by TP regulations. The undisputed fact is that Dabur International Ltd. has been permitted to use Dabur brand name and the appellant had been receiving royalty income for the same upto preceding AY. The TPO has treated said agreement dated 01.04.2003 as basis for arm's length price in the absence of any comparable provided by the appellant. Now the issue is whether TPO is correct in adopting 4% rate of royalty chargeable from Dabur International Ltd. Clause 4 of said agreement is reproduced as under: In consideration for due discharge by Dabur of its obligations hereunder and use of its trademark/trade name, Dabur is entitled during terms of agreement to a royalty of: (a) 3% of FOB sales (net of taxes and sales return) of Redrock of Dabur branded products which are developed and marketed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted its plea and scaled down the rate of royalty to 0.75% and directed adjustments accordingly. In its discussion, the ITAT affirmed the findings of the Appellate Commissioner and also the argument of the assessee with respect to absence of brand building, etc. The discussion by the ITAT in this regard, inter alia is as follows:- 35. From the co-joint reading as contemplated u/s 92C of the Act read with Rules 10B and 10C of the Income Tax Rules, 1962, it would be clear that for the purpose of making transfer pricing adjustments, the arm's length price has to be determined on finding out similar type of payments received by similarly situated and comparable independent entities. But in the present case, no comparable case has been brought on record by the TPO or the ld. CIT(A) while making adjustment on account of royalty. Moreover, no agreement was inforce to charge royalty from the AEs and that the FMCG products are new to the assessee who is known for its Herbal and Ayurveda products. In the instant case, it is not brought on record that the assessee had incurred any expenses for marketing the products manufactured by M/s Dabur International Ltd. (AE) in UAE and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other contribution. Therefore, the assessee did not receive any royalty for the year under consideration and in the preceding year, the royalty @ 1% was paid to the assessee for the reason that Ayurvedic products were made with the technical know-how and R D support of the assessee. However, for the year under consideration, the FMCG products were manufactured which were different from the Indian products having different raw material and medium used in the manufacture. At the same time, the brand name of the assessee was used by the AE and in the earlier years the assessee provided the R D support, know-how technologies etc. which helped the AE for the year under consideration also to some extent. It is also noticed that the assessee received the royalty @ 1% in the preceding year. The TPO also while working out the royalty rate for the year under consideration was of the view that the royalty @ 1% was chargeable on the products manufactured without the aid and support of assessee company but marketed by using Dabur'' name, however, no basis has been given for the same. 5. The assessee contends that the mere absence of consideration for use of the Dabur bran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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