TMI Blog2019 (8) TMI 1534X X X X Extracts X X X X X X X X Extracts X X X X ..... As the revenue had failed to establish the existence of any 'understanding' or an 'arrangement' or 'action in concert' as per which the assessee had agreed for incurring of AMP expenses for brand building of its AE, viz. L Oreal S.A., France, therefore, the AMP expenses incurred by the assessee had been held by us as not having been incurred by the assessee for brand building of its AE. Accordingly, as no part of the AMP expenses are attributable to rendering of any DEMPE functions for the brands owned by the AE, therefore, the TP adjustment of ₹ 60.03 crore made by the TPO in respect of the distribution segment of the assessee on account of alleged differences in intensity of AMP functions performed by the assessee vis a vis the comparable companies in order to align the functions, assets and risks profile of the assessee with that of the comparable companies, cannot be sustained and are liable to be vacated. Adjustments on account of payment of royalty on trademarks - HELD THAT:- Adhoc disallowance of the royalty payment by the TPO is beyond the realm of his jurisdiction and cannot be sustained. It is also the claim of the assessee that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings afford a reasonable opportunity of being heard to the assessee, who shall be at a liberty to substantiate its claim that the payment of royalty on technical knowhow @5% (on sales) was at ALP and no adjustment was called for in respect of the same. - ITA No. 7194/Mum/2017 - - - Dated:- 23-8-2019 - Shri M.Balaganesh, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : Shri N iraj Sheth, A.R For the Respondent : Shri Anand Mohan, CIT D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the A.O under Sec.143(3) r.w. Sec.144C(13) of the Income Tax Act, 1961 (for short Act ), dated 15.11.2017 for A.Y. 2012- 13. The assessee has assailed the impugned order on the following grounds of appeal: Based on the facts and circumstances of the case, L'Oreal India Private Limited (hereinafter referred to as the 'Appellant') respectfully craves leave to prefer an appeal against the assessment order passed by the learned Deputy Commissioner of Income Tax - 7(l)(2), Mumbai dated 15 November 2017 (received on 20 November 2017) under section 143(3) read with sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided the details. 8. Erred in overriding the charging provisions of the Sec.4 of the Act by the machinery provisions of Sec.92 of the Act to bring to tax fictional/assumed/hypothetical income/benefit; Business and commercial expediency 9. erred in holding that the Appellant incurred AMP expenses for promoting the brands owned by overseas AE, instead of appreciating that the Appellant was only carrying out its business by using the wellestablished brands and any benefit derived by the AE is purely incidental; Most appropriate method 10. erred in applying bright line test ('BLT ) and treating the same as routine ALP determination method under Other Method to determine the arm's length price of the AMP expenses incurred by the Appellant; 11. without prejudice to the above, erred in not considering the profit level indicator of 'AMP adjusted gross profit' for benchmarking AMP transaction; Manufacturing segment - comparable set 12. without prejudice to the above, erred in assuming that the alleged AMP expenses incurred by the Appellant was in proportion to the net sales earned in respective segment, without requesting for such dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses incurred without appreciating that addition if any, shall be commensurate with agency function, if any, undertaken by the Appellant; B. Alternate Adjustment on manufacturing segment on account of payment of royalty for use of technical know-how and trademark 22. erred in making an arbitrary alternate adjustment of ₹ 56.37 crores (₹ 34.20 crores for technical know- how and ₹ 22.17 crores for trademark) in respect of payment of royalty to the AEs by the Appellant for use technical know-how and trademark; 23. erred in not accepting the benchmarking analysis undertaken by the Appellant using the Comparable Uncontrolled Price Method ('CUP'), wherein reliance was placed on a royalty benchmarking study undertaken by independent consultant - NERA Economic Consulting, in accordance with the provisions of the Act, read with the Rules, for the determination of arm's length price of the aforesaid international transaction Payments made to AEs for use of technical know-how 24. erred in treating arm's length price of payment of royalty for use of technical know-how at an adhoc rate of 2.3% as against 5% paid by the Appellant: 25. er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in proposing use of adjusted RPM by calculating adjusted cost as the most appropriate method, to benchmark the said international transaction: 33. erred in disregarding the fact that intensity based comparability adjustment would result in re- characterization of the business of the Appellant; 34. without prejudice to the above, in an attempt to account for difference in intensity of AMP functions, erred in inadvertently making an adjustment based on the total 'General and Administrative Expenses' incurred by the comparable companies, instead of AMP expenses itself, as stated in the TP order; 35. without prejudice to the above, erred in applying adhoc markup for 16.90% (without providing any backup) to arrive at the adjusted sales for computation of margins of the comparable companies. 36. without prejudice to the above, erred in not providing the benefit of the variation/ reduction of 3 percent from the value of the international transaction as provided in proviso to section 920(2) of the Act, while determining the arm's length price; 37. without prejudice to the above, erred in not following Learned TPO's own approach in Appellant's own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing international transactions with its AEs which were reported to be arm s length in its Form 3CEB: Nature of transaction Value of international transaction (Rs.) Import of raw material/packing material for manufacture of finished goods 89,629,740/- Export of raw material/packing material 1,29,554/- Import of finished goods for resale in India 980,077,220/- Export of finished goods manufactured by L Oreal India 531,884,820/- Rendering evaluation and technical testing services 567,680,621/- Royalty payments for use of technical know-how, brand name, trademark, etc. 854,994,314/- Availing international marketing support services 341,404,193/- Availing consultancy services 216,607,263/- Import of fixed assets 12,009,395/- Reimbursements receivable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The A.O after receiving the order passed by the TPO under Sec.92CA(3), dated 31.10.2016 gave effect to the recommended total adjustments of ₹ 354.73 crores viz. (i) adjustment on account of distribution segment: ₹ 100.05 crores; and (ii) adjustment on account of manufacturing segment: ₹ 254.68 crores. Accordingly, on the basis of the aforesaid recommendations of the TPO the A.O vide his draft assessment order passed under Sec.143(3) r.w.s 144C(1), dated 27.12.2016 inter alia made an addition of ₹ 354.73 crores and proposed to assess the income of the assessee at ₹ 426,77,40,190/-. 6. Aggrieved, the assessee filed its objections with the Dispute Resolution Panel-1 (WZ), Mumbai (for short DRP ). The assessee objected to the alleged presumption of provision of brand promotion services-AMP expenditure as an International transaction by the TPO. It was averred that the TPO had erred in alleging that the AMP expenses incurred by the assessee was an international transaction. In fact, it was the claim of the assessee that the aforesaid expenses were exclusively incurred for its business and not for the brand promoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the backdrop of the aforesaid facts, the DRP keeping in view the changed legal scenario as per which an issue decided on its part in favour of an assessee was no longer appealable by the department, therefore, in order to keep the issue alive and protect the interest of the department rejected the objections raised by the assessee and upheld the order of the TPO. The DRP while concluding as hereinabove, observed viz. (i) that, the TPO had used a reasonable method to determine whether the AMP spent by the assessee was in line with the other comparables or was excessive; (ii) that, the TPO had rightly observed that excessive AMP expenditure leads to promotion of brand of the AE for which the assessee was required to be compensated; (iii) that, the TPO had rightly observed that excessive AMP expenditure represents an international transaction under the provisions of Sec. 92B of the Act; and (iv) that, the TPO was right in concluding that excessive AMP expenditure needs to be benchmarked separately and not through a bundled approach. As regards the objection of the assessee in respect of adjustment proposed by the TPO on account of payment of royalty for use of technical knowhow and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) paid by the assessee to its AE viz. (i) royalty for trademark: 1.75% and (ii) royalty for technical knowhow: 2.7% [5% (-) 2.3%], on the ground that the same was excessive in nature. Also, the assessee has assailed the alternate adjustment of ₹ 60.03 crore to the distribution segment of the assessee on account of alleged differences in intensity of the AMP functions performed by the assessee vis- -vis the comparables. 9. We shall first advert to the primary contention of the ld. Authorised representative (for short A.R ) for the assessee, that in the absence of any agreement with its AE for incurring of AMP expenses for carrying out DEMPE functions for the intangibles owned by the AE, the AMP expenses incurred by the assessee would not fall within the realm of the meaning of an international transaction envisaged in Sec. 92B of the Act. As is discernible from the orders of the lower authorities, we find, that the primary focus of the ld. A.R is to impress upon us that the lower authorities had erred in not appreciating that the AMP expenses incurred by the assessee cannot be held as an international transaction under Sec.92B of the Act. It was vehemently averred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is a leading player in the global cosmetic industry. It is also active in the dermatology sector. L Oreal group has its business in more than 130 countries with offices in 66 countries and employs more than 68,900 people. It has lots of consumer brands recognised all over the world. Some of the major brands of L Oreal Group include L Oreal Paris, Garnier, Ralph Lauren, Biotherm, Maybelline etc. As observed by us hereinabove, the assessee company viz. L Oreal India Pvt. Ltd. is a wholly owned subsidiary of L Oreal S.A., France. The assessee company had commenced its operations in India in the year 1994. The assessee had entered into a license agreement dated 02.01.2012 (effective from 01.012012) with L Oreal S.A., France, as per which it was awarded the exclusive right to import, manufacture (or have manufactured by another L Oreal affiliate) market, distribute and sell branded products of L Oreal Group. A perusal of the orders of the lower authorities reveals that the assessee derives revenues from two primary activities viz. (i) manufacturing of cosmetic products; and (ii) distribution of cosmetic products imported from associate enterprises. 11. We find that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in its price. Accordingly, the TPO was of the view that as the assessee was carrying out marketing functions for brand building of its AE, therefore, the same were also required to be benchmarked. While concluding as hereinabove, the TPO had drawn support from the BEPS report published by OECD. The TPO called upon the assessee to furnish the breakup of the AMP expenditure. The assessee furnished the bifurcation details of the AMP expenditure which were claimed to have been incurred by it for the promotion of its own products in India, as under: Sr. No. Head of expense Amount (Rs.) 1. Product advertisement expenses 3,325,647,907/- 2. Marketing Fees (DMI fees paid to Overseas AE) 341,404,193/- 3. Pure sales promotion expenses 1,947,090,162/- Total 5,614,142,262/- It was the claim of the assessee that out of the aforesaid AMP expenses of ₹ 561.41 crores (34% on sales) an amount of ₹ 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romotion expenses is cost of material like hangers, danglers, display units etc installed at various point of Sales (POS) like malls, shops, stores, retailers etc. As per the explanation given by the assessee, these are the expenses on display at malls, shops, stores and retailers etc. Obviously these expenses are for DEMPE functions and hence cannot be categorised as selling expenses. Hence, the same are considered to be in nature of advertisement expenses. 5. Marketing Expenses- Industrial Development 1,66,55,382 Cost for packaging /repackaging in case of promotional activities like artwork, taping together a combo product, label etc. After verification of the submission of the assessee, the contention o the assessee is accepted and the expenditure is held to be in the nature of selling expenditure. 6 Marketing Expenses- Others 12,59,24,167 Misc expenses like entry fees for Product of the year 2011, diary calendar, other costs at sales conferences After verification of the submission of the assessee, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al marketing services from overseas AE. The centralized international marketing management structure (DMI) providing common marketing services for the development of international marketing material and tools for the benefit of the L Oreal affiliates. Services received are in connection with communication development, launch information and international marketing studies, packaging development. After verification of the submission of the assessee, the contention of the assessee is not accepted. Hence, the same are considered to be in nature of advertisement of expenses. On the basis of his aforesaid observations the TPO concluded that the total AMP expenses of ₹ 561,41,42,262/- comprised of Selling expenses of ₹ 93,18,20,741/- (which worked out to 16.5% of total AMP expenses). Accordingly, it was observed by him that the balance amount of₹ 468,23,21,521/- (which worked out to 83.5% of total AMP expenses) were to be considered as the base figure of AMP expenses for determination of the amount for which the assessee was to be compensated by its AE. On the basis of the aforesaid calculation of the advertisement expenses at ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by the TPO for the following reasons: Sr. No. Name of the comparables Findings of the TPO 1. Gillette India Ltd. One common feature, in respect of these comparables is that the intangibles in all these cases are owned by the foreign AE. Hence the AMP transaction in all these cases is controlled transactions. It is a basic tenet of the transfer pricing regulations that a controlled transaction has to be compared with an uncontrolled transaction. A controlled transaction cannot be compared with another controlled transaction. Hence these comparables cannot be taken into account for determination of the AMP adjustment. It is no where the contention of the assessee that these brands are owned by the comparables entity itself. Hence the contention of the assessee on this point stands rejected. 2. Procter Gamble Hygiene and Health Care Ltd. 3. Reckitt Benckiser (India) Ltd. 4. Colgate Palmolive India Ltd. 5. Reckitt Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.08 2. HGS Business Services Private ltd. 14.52 3. Asian Business Exhibition Conferences Ltd. 12.09 Mean 16.90% Accordingly, the TPO was of the view that the assessee was to be compensated by its AE for the AMP expenses along with a margin of 16.90%. In the backdrop of his aforesaid working the TPO worked out the excess AMP expenditure incurred by the assessee (manufacturing segment) at ₹ 254.68 crores, as under: Net Sales of the taxpayer = ₹ 1214.09cr. Arm s Length % of AMP Expenditure = 10.41% Arm s Length AMP (10.41 % * ₹ 1214.09 cr) = 126.39 cr. Expenditure incurred by the taxpayer on AMP (Manufacturing sector) = ₹ 344.25 Expenditure incurred for developing the intangibles [₹ 344.17 (-) ₹ 126.26 cr.] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 248.91 40.96 16.45% 34.20 13.74% 2. J.L. Morison (India) Ld. 113.94 5.22 4.58% 4.35 3.83% Average (%) 8.78% According ly, it was observed by the TPO that the ALP of the AMP spending for the distribution segment worked out at 8.78%. In other words, he was of the view that AMP spending of 8.78% was to be treated as the permissible expenditure to have been incurred by the assessee (distribution segment) in the normal course of its business. As against that, it was observed by the TPO that as the assessee had incurred AMP expenditure of 28.35%, therefore, the expenditure i.e 19.57% [28.35% (-) 8.78%] was to be treated to have been incurred in excess of the permissible limit. On the basis of his aforesaid observations, the TPO concluded that the assessee (distribution segment) was required to be compensated along with a suitable mark up for the AMP expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said benchmarking analysis. In fact, the TPO was of the view that in order to make the comparables selected by the assessee/TPO similar to the assesses functions, assets employed and risk assumed, suitable adjustment was required to be made as per Rule 10B(2) of the Incometax Rules. The TPO worked out the intensity of the AMP expenses on the profit level indicator of Operating profit/Sales percentage at 7.75%. Accordingly, the TPO on the basis of the adjusted RPM method proposed an adjustment of ₹ 60.03 crores in respect of the ALP of the goods imported by the assessee from its AE. 15. Further, we find, that it was observed by the TPO that the assessee in respect of its manufacturing segment had paid royalty @ 6.75% of its total sales. It was observed by the TPO that the royalty of 6.75% of sales (manufacturing segment) comprised of two parts viz. (i). royalty on account of technical knowhow : 5%; and (ii). royalty on account of trademark : 1.75%. We find that as regards the payments made by the assessee towards royalty the TPO had observed as under: (A). Trademark Royalty : It was observed by the TPO that the assessee had not paid any royalty on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,94,314/-). 16. We have perused the orders of the lower authorities and deliberated at length on the facts involved in the case before us, in the backdrop of the contentions advanced by the authorised representatives for both the parties. The core issue involved in the present appeal is as to whether the advertising, marketing and promotion expenses ( AMP ) incurred by the assessee company can be held to be an international transaction. As observed by the Hon ble High Court of Delhi in the case of in Sony Ericsson India Pvt. Ltd. Vs. CIT (2015) 374 ITR 118 (Del) and thereafter in Maruti Suzuki India Limited v. CIT (2016) 328 ITR 210 (Del),onus is cast upon the revenue to show that there was an international transaction involving the assessee and its AE with regard to incurring of the AMP expenses, before it commences the exercise of determining the ALP of such transaction. If the revenue fails to discharge this onus then the question of the further step of determining the ALP of such AMP expenses would not arise at all. Now, in the case before us, it has throughout been the case of the assessee that its marketing activity was focused on generating domestic sales for its manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d warehouses of the licensee i.e. the assessee company or of the companies manufacturing on a sub-contract basis for the licensee, the same was to be comprehended as incurring of AMP expenses for brand building of its AE viz. L Oreal S.A., France. In sum and substance, we are persuaded to subscribe to the claim of the ld. A.R that there is nothing provided in the agreement , dated 02.01.2012, which would reveal that there was any arrangement, understanding or action in concert between the assessee and its AE viz. L Oreal S.A., France for incurring the AMP expenses by rendering services towards the DEMPE functions for the intangibles owned by the AE, which would take the transaction within the realm of the definition of an international transaction envisaged in Sec. 92B of the Act. Also, we find that the TPO had absolutely misconceived the submissions of the assessee and had wrongly concluded that it had admitted that there was a price reduction on goods imported towards AMP expenditure incurred by it. As a matter of fact, it was submitted by the assessee that as the pricing of the products in the inter-company situation was driven by L Oreal Group Policy which allowed the entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to incur AMP expenses for brand building of its AE, therefore, in our considered view there would be no occasion to infer the existence of an international transaction as regards incurring of the AMP expenses by the assessee towards brand building of its AE. Our aforesaid view is fortified by the judgment of the Hon ble High Court of Delhi in the case of Valvoline Cummins (P) Ltd. Vs. DCIT (2017) 298 CTR 349 (Del). In the said case the Hon ble High Court had observed that as the AO/TPO were unable to show that there existed an international transaction involving incurring of AMP expenses between the assesse and its AE, therefore, the Tribunal was not justified in remanding the matter. In the case of Bausch Lomb Eyecare (India) Pvt. Ltd Ors. Vs. Addl. CIT (2016) 381 ITR 227 (Del) it was observed by the Hon ble High Court that where parties were unable to show existence of international transaction involving AMP expense with ascertainable price, then even if such price was nil, the provisions of Chapter X could not be invoked for undertaking TP adjustment exercise. A similar view had also been taken by the Hon ble High Court of Delhi in the case of CIT Vs. Whirlpool Of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incing. We are afraid, that as observed by us at length hereinabove, as the sine qua non for commencing the TP exercise is to show the existence of an international transaction, had not been shown to have been fulfilled in the instant case, therefore, the issue of traversing to the aspect of determining the validity of the method for determining the ALP of such transaction does not arise at all. At this stage, in order to dispel any doubts, we may herein observe that reference by the lower authorities as well as by the ld. D.R to the judgment of the Hon ble High Court of Delhi in the case of Sony Ericsson India Pvt. Ltd. Vs. CIT (2015) 374 ITR 118 (Del), being distinguishable on facts, would thus not assist the case of the assessee before us. In the said case the Hon ble High Court had treated the AMP expenses incurred by the assessee as an international transaction, for the reason, that the same was admitted by the assessee. However, as observed by us hereinabove, the assessee in the case before us had never admitted that the incurring of AMP expenses was an international transaction, and had in fact since inception canvassed that the said expenses were incurred in the normal cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and the AE s for sharing the expenses and the payments made by the assessee for the expenses of AMP. The TPO has also not brought any fact on record that there exist any agreement between the assessee and its AE to share or reimburse the AMP expenses. Moreover, we have seen that there is no material change in the facts for the year under consideration. Therefore, considering the above factual discussions and the decision of the coordinate bench of Tribunal for A.Y. 2008-09 to 2010-11, on the identical issue the ground No. 2 to 21 of the appeal is allowed. We thus in terms of our aforesaid observations, finding ourselves to be in agreement with the view taken by the Tribunal in the assesses own case for A.Y 2012-13 viz. M/s L Oreal India Pvt. Ltd. Vs. ACIT-7(1)(2), Mumbai [ITA No. 1417/Mum/2017; dated 30.01.2019],therefore, respectfully follow the same. Accordingly, being of the considered view that as the revenue had failed to discharge the onus that was cast upon it as regards proving that there was any 'understanding' or an 'arrangement' or 'action in concert' as per which the assessee had agreed for incurring of AMP expenses for brand building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in order to align the functions, assets and risks profile of the assessee with that of the comparable companies, cannot be sustained and are liable to be vacated. The Grounds of appeal No. 29 to 38 are allowed in terms of our aforesaid observations. 21. We shall now advert to the adjustments on account of payment of royalty @ 6.75% by the assessee viz. (i). royalty on trademarks : 1.75%; and (ii). royalty on technical knowhow : 5%. As observed by us hereinabove, the TPO had concluded that payment of royalty of 4.45% [Technical knowhow royalty: 2.7% (+) Trademark royalty: 1.75%] was excessive in nature. On the basis of his aforesaid observations the TPO had proposed an adjustment of ₹ 56,36,62,918/- (out of the total royalty of ₹ 85,49,94,314/-). 22. We shall first advert to the TP adjustment of 1.75% that was proposed by the TPO as regards the royalty for use of trademarks that was paid by the assessee to its AE, viz. L Oreal S.A., France. It was observed by the TPO that the assessee had not paid any royalty on account of exploiting of the trademark till A.Y 2005-06. The TPO was of the view that the assessee by incurring AMP expenses had as a matter of fact gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of AMP expenses towards DEMPE functions for the brand of its AE, viz. L Oreal S.A., France, had weighed in the mind of the TPO while concluding that the assessee was not required to have made any payment towards royalty on trademarks. As observed by us hereinabove, the adhoc disallowance of the royalty payment by the TPO is beyond the realm of his jurisdiction and cannot be sustained. It is also the claim of the assessee that the payment of royalty on trademarks at 1.75% (on sales) had been accepted by the TPO in its case for A.Y 2015-16. We find that the Tribunal while disposing off the appeal of the assessee for the immediately preceding year viz. A.Y 2012-13 was seized of a similar adhoc disallowance of royalty on trademarks of 1.75% (on sales). After necessary deliberations, the Tribunal had restored the matter to the file of the DRP for fresh adjudication. Accordingly, finding ourselves to be in agreement with the view taken by the Tribunal in the aforementioned preceding year viz. A.Y 2012-13, we thus on similar terms restore the matter to the file of the DRP. The DRP shall in the course of the set aside proceedings readjudicate the issue afresh. Needless to say, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards the royalty payment of 5% (on sales) by the assessee (manufacturing segment) towards usage of technical knowhow', and are unable to persuade ourselves to subscribe to the same. We have perused the novel methodology adopted by the TPO for working out the average ALP of royalty payments by the comparables and do not find favor with the same. Admittedly, as observed by the TPO, out of 12 comparables selected by the assessee only in the case of 4 comparables payments were made for both marketing processing royalty, while for in the case of the 8 comparables the payments were exclusively towards marketing royalty. The determination of ALP of the royalty payment for technical knowhow by the TPO at 2.3% viz. [average payment of royalty for both marketing processing of 4 comparables: 8.4% (minus) average payment of royalty for marketing of the remaining 8 comparables : 6.1%] clearly reflects an arbitrary approach on his part. In our considered view, the TPO either ought to have restricted himself to the average royalty of 8.4% for both marketing processing of the 4 comparables and made suitable adjustments as per rule 10B(1)(a)(ii) of the Income-tax Rules, 1962 to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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