2019 (8) TMI 1810 - AT - Income Tax

TP Adjustment - Adjustment on account of expatriate cost - HELD THAT - As in assessee s own case 2017 (10) TMI 1259 - ITAT DELHI where the Revenue preferred the appeal challenging a similar deletion and found that following the consistent view taken in assessee s own case by the Revenue as well as by the Tribunal, the Tribunal held that employment of the CUP method by the taxpayer in respect of the international transaction relating to the payment of royalty was proper and rule of consistency is required to be followed by the Revenue. Since the facts are similar and issue is identical, we find no reason to take a different view for this assessment year. While respectfully following the consistent view taken by the Tribunal in assessee s own case for the Assessment Years 2006-07 to 2009-10, we hold that the impugned addition cannot be sustained and there was no illegality or irregularity in the findings of the Ld. CIT(A). We, therefore, while upholding the findings of the Ld. CIT(A) find the appeal of Revenue as devoid of merits and accordingly dismissed the same.

Summary

Issues:
1. Adjustment of royalty payment under Transfer Pricing provisions.
2. Arm's-length price determination for international transactions.
3. Deletion of addition by the Commissioner of Income-tax (Appeals).
4. Consistency in approach for benchmarking royalty payments.

Analysis:
1. The appeal concerned the adjustment of royalty payment made by the assessee in an international transaction during the Financial Year 2010-11. The Transfer Pricing Officer (TPO) suggested an adjustment to the tune of the royalty payment, which was added to the final assessment order by the Assessing Officer. The Commissioner of Income-tax (Appeals) directed the TPO to treat the royalty payment at arm's length, leading to the deletion of the addition.

2. The issue revolved around the arm's-length price determination for the international transaction entered into by the assessee. The TPO's adjustment was based on the difference in arm's length price, which the Commissioner found unjustified. The Commissioner noted that the assessee's business heavily relied on the trademark and technical know-how provided by the associated enterprise, justifying the royalty payment.

3. The deletion of the addition by the Commissioner was challenged by the Revenue in the appeal. The Revenue argued that the Commissioner erred in deleting the adjustment without sufficient evidence to reduce the royalty payment to zero. However, the Commissioner's decision was based on factual verification and previous Tribunal decisions in favor of the assessee.

4. The Tribunal upheld the Commissioner's decision, emphasizing the importance of consistency in approach for benchmarking royalty payments. Referring to previous judgments in the assessee's own case, the Tribunal found no reason to deviate from the established view. The Tribunal concluded that the impugned addition was not sustainable, dismissing the Revenue's appeal as devoid of merits.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to delete the addition related to the royalty payment, based on the consistent approach and findings in previous assessments.