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2020 (1) TMI 1190 - HC - Income TaxTPA - Selection of MAM - CUP v/s TNMM - Whether CUP is most appropriate method for benchmarking of transaction of Royalty and Product development fee? - Tribunal has held that on fact there was no good reason for the TPO to abandon the TNMM Method and invoke the CUP Method and remanded the case back to him for a fresh decision after hearing the parties - HELD THAT - TPO has not been able to show that on fact the applicability of the CUP Method is more appropriate. Neither any reason is put forth to justify the departure from the TNMM being followed earlier nor there is any averment of change in circumstances from the previous years. In this view of the matter we see no legal infirmity in the Tribunal being the final fact finding authority to come to the conclusion that the invocation of the CUP method was not justified and no reason existed for the departure from the past practice. Appeal dismissed.
Issues Involved:
1. Applicability of CUP method for benchmarking transactions of Royalty and Product development fee 2. Comparison of the case with CIT vs EKL Appliances Ltd. 3. Applicability of benefit test for benchmarking transactions related to Royalty and product development fee Analysis: Issue 1: Applicability of CUP method for benchmarking transactions of Royalty and Product development fee The appeal was filed against the order passed by the Income Tax Appellate Tribunal, Delhi Bench, remanding the matter back to the Transfer Pricing Officer (TPO) for fresh consideration regarding the use of the 'CUP Method' for benchmarking transactions of Royalty and Product development fee. The appellant claimed that the CUP method is the most appropriate method for benchmarking. However, the Tribunal held that there was no good reason for the TPO to abandon the TNMM Method and invoke the CUP Method. The Tribunal concluded that the invocation of the CUP method was not justified, and there was no reason to depart from the past practice of using the TNMM Method. Issue 2: Comparison of the case with CIT vs EKL Appliances Ltd. The appellant argued that the facts of the case were different from the case of CIT vs EKL Appliances Ltd. The Tribunal, however, did not find this argument convincing and held that the benefit test is not applicable for benchmarking transactions related to Royalty and product development fee. The Tribunal emphasized that the final fact-finding authority is entitled to determine the most appropriate method based on the specific circumstances of the case. Issue 3: Applicability of benefit test for benchmarking transactions related to Royalty and product development fee The learned counsel contended that the Tribunal could only set aside the assessment order and remand the case for a fresh decision but could not dictate the method to be followed. However, it was observed that the appellant failed to demonstrate the superiority of the CUP Method over the TNMM Method. No valid reasons were presented to justify the departure from the TNMM Method previously used, nor were there any changes in circumstances from previous years. Consequently, the Tribunal's decision to dismiss the appeal was upheld, as it was deemed the final fact-finding authority in determining the appropriate benchmarking method. In conclusion, the appeal was dismissed as the Tribunal's decision to reject the CUP Method and remand the case for fresh consideration based on the TNMM Method was found to be legally sound and justified.
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