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TMI Blog2010 (7) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Technical Adviser were correctly found by the ld. CIT(A) to be genuine business expenditure. It remains undisputed that as per the OECD guidelines, the assessee was not a contract manufacturer. Rather, it was an independent company. The royalty was paid by the assessee under the Technology Agreement, computed on the basis of the entire production/sales. Considering, all the facts We do not find any reason to record any variance with the well reasoned elaborate findings of fact recorded by the ld. CIT(A). The same are hereby upheld. In the result, the appeal filed by the Department is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... to Associated Enterprises (International Transaction), the assessee had with its associated enterprises and consequently the TPO made/suggested an adjustment of ₹ 43,68,838/- on account of difference in arm's length price to the value of International Transactions. 4. The TPO after going through the transfer pricing documentation and other details filed by the assessee during the proceedings under section 92CA of the I.T. Act, determined the arm's length price of royalty paid to Associated Enterprises (International Transaction) after taking into account the following: i) The assessee used the CUP method for determining the arm's length price for royalty paid to collaborator,i.e., AE and compared the rate of royalty with the rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made for car 1,58,190 Payment made for residential accommodation 4,80,000 Total 16,76,839 5. The TPO was of the opinion that since as per the agreement the royalty payment was also towards the improvement of technical information relating to process which is developed by the AE, therefore, the assessee was not required to incur the expenditure on the two personnel deputed by the AE. Hence the TPO held that the amount of ₹ 25,52,610/- paid to the Mr. Keichi Osawa (Technical Advisor) and Mr. Tadao Katsuchi (Joint Managing Director) is not at arm's length and therefore to that extent adjustment is required. 6. Thus, the AO/TPO made an adjustment of ₹ 43,68,838/- on account of arm's length price of royalty paid to Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company of MMC Japan. During the assessment year 2004-05 , i.e., the year under consideration, the assessee paid to him, a sum of ₹ 16,76,839/- by way of salary allowance and perquisites. This expenditure did not relate to the payment of royalty, the Joint Managing Director having not been appointed under the know-how lease agreement with MMTL. The remuneration was determined by the company on the basis of similar payment to the assessee's own employees. It was not shown otherwise. This payment did not qualify the test for arm's length price concerning payment of royalty. 12. Further, the assessee appointed as Technical Adviser Mr. Keichi Osawa. He was appointed under the agreement. On the assessee's request, he was deputed by MMTL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India. As per section 6.01, after the effective date of the agreement and on the written request of SOPF (the assessee), MMTL may despatch a technically qualified Engineer of MMTL to the assessee as a Technical Adviser. As per section 6.2 (2), the assessee was to bear, inter alia, gasoline in India, postage, telephone and facsimile cost incurred by the Technical Adviser in performing the services under the Agreement. In fact, the agreement made it clear that MMTL was to depute a Technical Adviser on the assessee's request and the remuneration paid to the Technical Adviser was to be borne by the assessee. Pertinently, such request for deputing the Technical Adviser was made by the assessee to MMTL only in the year 2003-04. The agreement d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed working in this regard. Therein, it had been clearly mentioned that the payment of royalty to the AE was of ₹ 12.82 lakhs. Moreover, this royalty of 12.82 had been recovered as a part of sale consideration of the components sold to them at an arm's length price in accordance with the Cost Plus Method and the TNM Method, which was accepted by the TPO. Also, the sale price in the case of buy back of components was undisputedly a negotiated price determined on the actual cost to the assessee, which included royalty paid. The break up thereof was duly submitted by the assessee before the TPO. On the basis of this, the arm's length price stood justified on acceptable margin under TNM Method. 15. It remains undisputed that as per the OE ..... X X X X Extracts X X X X X X X X Extracts X X X X
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