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TMI Blog2013 (12) TMI 1356X X X X Extracts X X X X X X X X Extracts X X X X ..... know-how on value added price to the principal - Thus royalty payment was independent of manufacturing of goods - royalty had been paid not on entire sale price but only value added price which was worked out separately - The royalty had also been paid on sale to third parties which had been allowed but royalty on sales to AE had not been allowed when rate of royalty was the same - no disallowance had been made in the earlier year – the order of CIT(A) set aside – Decided in favour of Assessee. - IT Appeal No. 704 (Mum.) of 2012 - - - Dated:- 4-4-2013 - Rajendra Singh And Vivek Varma, JJ. For the Appellant : R. Muralidhar. For the Respondent : Ajeet Kumar Jain. ORDER:- PER : RAJENDRA SINGH This appeal by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of contract manufacturing. Since it was a case of contract manufacturing, the TPO held that no royalty was payable and, therefore, determined arms-length-price of royalty at nil and recommended adjustment of Rs.54,19,026/- as there was no justification for payment of royalty to the principal. The AO following the order of TPO made an addition of Rs.54,19,026/-. 3. The assessee disputed the decision of the AO and submitted before CIT(A) that the assessee had referred to contract manufacturing in transfer pricing analysis by mistake. The assessee had purchased raw material, packing material and all other consumables on its own account and the assessee had also paid sales tax on sale of products. The entire risk relating to purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been deleted by the Tribunal. The ld. DR on the other hand placed reliance on the orders of authorities below. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding transfer pricing adjustment made by the AO on account of payment of royalty to the principal who was an associate enterprise (AE). We find that the same issue has already been considered by the Tribunal in assessee's own case in assessment years 2003-04 and 2004-05 (supra), in which case also similar royalty had been paid by the assessee based on the same agreement for manufacture of product on behalf of the principal. The Tribunal noted that both the AO and TPO had held that there was no justification for payment of royalty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out separately. The royalty had also been paid on sale to third parties which had been allowed but royalty on sales to AE had not been allowed when rate of royalty was the same. Further, no disallowance had been made in the earlier year. It was thus held by the Tribunal that the royalty was thus for the purpose of business. The Tribunal accordingly, deleted the addition on merit also. Facts this year in which royalty has been paid based on the same agreement as in earlier are identical. Therefore, respectfully following the decision of the Tribunal in assessee's own case in assessment years 2003-04 and 2004-05 (supra), we set aside the order of CIT(A) and delete the addition made. 6. In the result, appeal of the assessee is allowed. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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