TMI Blog2018 (2) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... be the parameter to hold that the technological knowhow or license was of no benefit hence there was no requirement to pay the royalty. Loss cannot be co- related with the economic benefit of use of technology or knowhow because profit and loss are market driven and host of other economic factors. TPO was only required to see, whether the payment of royalty meets the arm’s length requirement of ALP or not. When the chance was given to the TPO in the remand proceedings by the CIT(A) he has failed to examine the external CUP. CIT (A) has analyzed all the factors and various comparable uncontrolled transactions to reach to a conclusion that royalty payment @ 3.15% is at ALP, and accordingly, we do not find any reason to deviate from such a finding and the same is upheld. - Decided against revenue. - I.T.A. No. 544/DEL/2015 - - - Dated:- 15-2-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER And SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Appellant by : None Respondent by : H. K. Chaudhary, CIT-DR ORDER Per Amit Shukla, J. M. The aforesaid appeal has been field by the Revenue against the impugned order dated 19.11.2014, passed by ld. CIT(Appeals)-44, New Delhi for the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reimbursement of travelling expenses CUP 25804228 Reimbursement of salary CUP 22270853 Class-Ill Payment of technical fee CUP 54747151 Class-IV Interest on external commercial loan CUP Class-V Payment of royalty CUP 9142654 Class-VI Sale of sample CPM 33255 4. So far as the transaction of royalty payment is concern, the TPO observed that royalty payment amounting to ₹ 91,42,654/- was paid to its AE, which has been stated to be for non exclusive right of license to use of the technology including knowhow of its AE for the purpose of carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeping in view the fact that the assessee has neither benchmarked this transaction properly by applying the most appropriate method and nor has it furnished the requisite information I am constrained to determine the arm s length price of this transaction at NIL under CUP method. No independent person in similar circumstances would pay any such royalty. 5. Various decisions of the Tribunal as relied upon by the assessee in support of its case have been distinguished by the AO. Accordingly, the entire royalty payment has been adjusted after taking the ALP at Nil and addition of ₹ 91,42,654/- was made. 6. Before the ld. CIT (A), the assessee besides making elaborate submissions, filed additional evidences in the form of instances of royalty paid in comparable cases by the uncontrolled third parties for the purpose of bench marking the international transaction of payment of royalty. Various external comparables were given for the purpose of external CUP to demonstrate that average rate of royalty across the industry was around 3%, whereas assessee has paid royalty to its AE effectively @ 3.15% of the net sales which is comparable to the royalty paid in comparable uncont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stat Amendment to exclusive patent, technology and know-how license to manufacture, use, exploit, sell and sublicense composite reinforced metallic cylinders and tubes, and non-metallic rehabilitation systems produced to prevent propagating ductile fractures or to increase the burst pressure. Environmen- -tal Recycling Technologies plc Global Tech International, Inc London Farmington Hills 6/23/ 2008 3.00% Royalty Stat Exclusive patent and knowhow license to make, use, sublicense, and sell automotive products or components which do not feature as part of its manufacture the essential encapsulation of a magnesium part. Turbodyne Technologi es, Inc. and Turbodyne Systems, Inc. Allied Signal, Inc. California Torrance 1/28/ 1999 3.70% Royalty Stat Exclusive patent license to make, use and sell electrically assisted charge air products or other engine products, including electrically ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPO to submit his remand report which has been incorporated by the ld. CIT (A) from pages 11 to 15 of the appellate order. In the said remand report, the TPO submitted that the CUP data relied upon by the assessee is unreliable and cited the OECD Transfer Pricing Guidelines and the decision of ITAT Mumbai Bench in the case of UCB India Pvt. Ltd. vs. ACIT (2009) 30 SOT 95, but failed to examine the external comparables or any comments on merits. Ld. CIT (A), after considering the entire material facts on record and the submissions made by the assessee as well as the remand report of the TPO, held that the royalty paid by the assessee to its AE @ 3.15% on net sales meets the arm s length requirement and it is comparable to the royalty paid by uncontrolled third parties. He further held that no meaningful conclusion was provided by the TPO to hold that the entire royalty payment should be reduced to Nil. The entire revenue of the assessee is from products manufactured by the technology provided by its AE. The assessee has been supplying automobile component to various reputed automobile manufacturers such as Honda Siel Cars India Ltd. There is an agreement between the assessee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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