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TMI Blog2017 (12) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... the delay is not inordinate, we are inclined to delete the disallowance and the consequent addition made to the returned income of the assessee. Benefit of credit of tax so paid - Held that:- DRP has directed the AO to verify the claim of the assessee with reference to the dividend distribution tax of ₹ 2,08,89,625 paid by the assessee as disclosed in the ROI and to refund the tax of ₹ 4,85,806 claimed by the assessee in accordance with law, but the AO, while giving effect to the order of the DRP, has failed to give the said credit. We, therefore, direct the AO to verify the claim of the assessee and allow the benefit of credit of tax so paid and process the refund accordingly. - ITA No.193/Hyd/2017 - - - Dated:- 29-11-2017 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accountant Member For The Assessee : Shri Abhiroop Bhargav For The Revenue : Smt. Pallavi Agarwal, CIT(DR) ORDER Per Smt. P. Madhavi Devi, J.M. This is assessee s appeal for the A.Y 2012-13 against the assessment order, dated 20.12.2016 passed u/s 143(3) r.w.s. 144C(1) of the Act. 2. Brief facts of the case are that the assessee company, engaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act justifying the payment of royalty while rejecting the CUP method adopted by the assessee to determine the ALP and has given no reason or basis for arriving at 2% as the ALP. Therefore, according to him, the order of the TPO is not sustainable. He also placed reliance upon the decision of the ITAT in assessee s own case for the A.Y 2010-11 wherein this issue has been considered at length and at Para 10 to 11 it was held as under: 10. We are really surprised to see the reasoning of TPO in fixing the ALP of royalty payment at 2%. It is manifest from TPO's order he has rejected assessee's TP analysis under TNMM. Further, in para 6.4 of his order, TPO has mentioned of undertaking an independent analysis under TNMM for selecting comparables and determining ALP. However, even after repeatedly scanning through his order, we failed to find any such analysis being done by him. Similarly, though in para 5.1.1, ld. DRP has observed that TPO has benchmarked intangible transactions by using CUP, but, the order passed by TPO does not support such conclusion. It is an accepted principle of law that TPO has to determine the ALP by adopting any one of the methods prescribed u/s 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher at 4.67% than the rate at which royalty was paid by the assessee to its AE, the transaction involving payment of royalty was claimed to be at arm's length. A perusal of the order passed by the TPO u/s 92CA (3) of the Act shows that neither these comparables selected by the assessee in its TP study report were rejected by her nor any new comparables were selected by her by making a fresh search in order to show that the payment of royalty by the assessee to its AE was not at arm's length. She simply relied on the approval of SIA to hold that any royalty paid by the assessee on exports and other income was not allowable and disallowed the royalty payment to the extent of ₹ 40,51,486/- treating the same as the royalty paid by the assessee in respect of exports sale and other income. We are unable to agree with this strange method followed by the TPO to make a TP adjustment in respect of royalty payment which is not sustainable either in law or on the facts of the case. She has neither rejected the method followed by the assessee to bench-mark the transaction in respect of payment of royalty nor has been adopted any recognized method to determine the ALP of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we are of the opinion, reduction of rate of royalty by TPO from 3% to 2% is without any basis, hence, cannot be accepted. Accordingly, we delete the addition made on account of TP adjustment to royalty payment. Grounds raised are allowed . 4. The learned Counsel for the assessee has also drawn our attention to the order of the jurisdictional High Court in the assessee s own case for the A.Y 2010-11 wherein the Hon'ble High Court has confirmed the above order of the ITAT. 5. The learned DR, on the other hand, supported the orders of the authorities below. 6. Having regard to the rival contentions and the material on record, we find that the issue as to whether the assessee is required to establish the benefit derived by it and also the ALP rate of royalty has been considered by the Hon'ble jurisdictional High Court in the assessee s own case in ITTA No.595/2016 for the A.Y 2010-11 and vide orders dated 23.12.2016 it was held as under: 8. Having considered the rival submissions, we find that the assessee offered two transfer pricing studies in relation to payment of royalty. In so far as the acceptable study adopting the Comparable Uncontrolled Price metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase in the assessee's sales and profit. 11. Above all, there is no explanation forthcoming as to why the TPO decided upon 2% instead of the contractual rate of 3% for payment of royalty. No reason is offered by the TPO for picking on 2%. This whimsical fixation by the TPO amounts to an arbitrary and unbridled exercise of power. In consequence, we find that the TPO, having rejected the comparables cited by the assessee, did not take the trouble to examine alternate comparables so as to justify reduction of the rate for payment of royalty and by applying a wholly inapplicable methodology of determining the benefit from payment of such royalty, he capriciously reduced the rate for payment of such royalty from 3% to 2%. 12. On the above analysis, we find no grounds to interfere with the cogent and well reasoned order passed by the Tribunal. No question of law, much less a substantial question of law, therefore arises for consideration in this appeal . 7. Since the issue is the same for the relevant A.Y before us, the assessment order on this issue is set aside and the royalty payment at 3% of the net sales is confirmed to be at Arm s Length. Grounds of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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