9911796707
TMI Blog2013 (6) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to computation of arm's length price for royalty." 3. At the time of hearing before us, it was stated by the learned counsel that though the learned CIT(A) has allowed the relief to the assessee on merits, but, even otherwise, the addition is not called for because as per TPO's order, the difference between the net operating profit of the assessee and the arm's length price determined by the TPO is only 1.21% which squarely falls within the safe harbour zone as provided in proviso to Section 92C(2) of the Income-tax Act, 1961 at the relevant time. He, therefore, submitted that without going into the merits of the learned CIT(A)'s order, though the same is in favour of the assessee, the addition made by the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the payment of royalty has only to be determined. For that purpose the net operating margin of the assessee attributable to the payment of royalty are only to be calculated." 7. The arm's length price of the royalty is determined at pages 9 & 10 of the TPO's order. He determined the arm's length price of royalty under TNMM method, the relevant portion of which at page 9 reads as under:- "Net operating profit Rs.5,40,98,579 NPM (%) 5.02% Arm's length NPM as computed by the assessee 6.23% Net operating margin at Arm's Length Rs.6,70,80,532 Difference Rs.1,29,81,953 Accordingly, the Arm's length price of international transaction related to payment of royalty is computed at Rs.3,12,29,088/- against the declared value of Rs.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was 5.02%. The assessee has an option to adopt a price which may vary from arithmetical mean of ALP up to five per cent. The difference between the net profit of the assessee and NPM of the arm's length price is certainly less than 5% and, therefore, the assessee has a right to claim that the NPM of the assessee i.e. 5.02% should be adopted as arm's length price. The TPO had determined the arm's length price of royalty by TNMM. Thereafter, he worked out the addition which may be required to be made under the head 'royalty' and then he compared the royalty paid by the assessee and the ALP of royalty determined by him. However, we find that the proviso refers to the arm's length price determined by various methods and adopting of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
