TMI Blog2022 (9) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... ises and thus, deleted the addition made on account of transfer pricing adjustment for transaction related to royalty. Appellant concedes that if the rejected two comparables are taken into consideration, the payment made by the assessee to its AEs towards royalty would be at arm s length and no adjustment would be merited. He also concedes that the said two comparables comply with all the filters prescribed by the TPO. We therefore find that the reliance placed by CIT(A) and ITAT on the judgment of this Court in Chrys Capital Investment [ 2015 (4) TMI 949 - DELHI HIGH COURT] was correct - an enquiry under Rule 10B(3) ought to be carried out, to determine as to whether the material differences between the assessee and the said entity ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax (Appeals) [ CIT(A) ], which was partly allowed vide order dated 28.02.2018, the AO/TPO was directed to delete the addition made on account of transfer pricing adjustment for transaction related to royalty. 4. Aggrieved by the order of the CIT(A), the Revenue herein preferred an appeal before the ITAT, challenging the deletion of the adjustment of transaction related to royalty, however vide the impugned order, the ITAT dismissed the appeal by confirming the order of the CIT(A). 5. In the present appeal, the learned counsel for the Appellant states that the ITAT erred in confirming the order of the CIT(A) and failed to appreciate the fact that the royalty payment is excessive and not at arm s length on conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TPO has not discussed if there are any material facts like nature of entity, business model, terms of agreement, geographical area etc. pertaining to Columbia Laboratories Inc. and Premier Consumer Products Inc., which render them incomparable to the appellant. As stated above, he has merely rejected them on the ground that the rate of payment for royalty is very high. In view of the same the contention of the appellant is not acceptable. This principle has been upheld by the Hon ble Delhi High Court in the case of Chrys Capital Investment Advisors India Private Limited ITA No. 417/2014 which lays down the fundamental ratio that a comparable should not be rejected simply on the ground that is margin is extremely high (or low) in relative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to its AEs towards royalty would be at arm s length and no adjustment would be merited. He also concedes that the said two comparables comply with all the filters prescribed by the TPO. In this view of the matter, we therefore find that the reliance placed by CIT(A) and ITAT on the judgment of this Court in Chrys Capital Investment (supra), was correct. The relevant portion of the said judgment reads as follows, 44. In light of the above findings, this Court concludes as follows: (a) The mere fact that an entity makes high/extremely high profits/losses does not, ipso facto, lead to its exclusion from the list of comparables for the purposes of determination of ALP. In such circumstances, an enquiry under Rule 10B(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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