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TMI Blog2023 (5) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... tical purposes in very terms. Duty drawback addition - Assessee sole plea during the course of hearing is that the same already stands assessed in the succeeding assessment year 2019-20 i.e. the year of actual receipt - HELD THAT:- Faced with the situation, we deem it appropriate to restore the instant issue as well back to the Assessing Officer to ensure that there shall not be any double addition for the instant issue once this amount has already been assessed. He shall finalize the consequential factual verification of issue in very terms. - ITA No.649/PUN/2022 - - - Dated:- 17-2-2023 - SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI G.D. PADMAHSHALI, ACCOUNTANT MEMBER For the Assessee : Shri Rahul Mehta For the Revenue : Shri Dipak Garg, CIT-DR ORDER PER S.S. GODARA, JM : This assessee s appeal for A.Y. 2018-19 arises against the ACIT, Circle 1, Aurangabad s assessment s DIN Order No. ITBA/AST/S/143(3)/2022-23/1043686249(1) dated 30.06.2022, framed as per the CIT(DRP-3), Mumbai-2 s directions in DIN Order No.ITBA/DRP/F/144C(5)/2022-23/1043124808(1) dated 23.05.2022, in proceedings u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, in sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant prays that the addition of INR 27,31,022 made by Ld. AO and Hon ble DRP be deleted. 3. It next emerges during the course of hearing that the instant former issue of correctness of ALP adjustment to the tune of Rs.7,93,23,969/- representing royalty segment treated as an international transaction u/s 92B of the Act, is no more res integra since learned co-ordinate bench s latest order dated 13.01.2023 involving ITA No.204/PUN/2022 in taxpayer s own case for A.Y. 2017-18 has adjudicated the same as under: 2. The first issue raised in this appeal is against the making of transfer pricing adjustment of Rs.12,98,02,765/- with respect to the international transaction of `Payment of Royalty . 3. Succinctly, the facts of the case are that the assessee is a subsidiary company of MAN, Germany, which is world market leader for large diesel engines for use in Ships and Power stations. The assessee filed its return declaring total income at Rs.51,91,06,980/-, giving certain international transactions in Form No.3CEB. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) for determining Arm s Length Price (ALP) of the international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, .. . It is discernible from the above definition of the `international transaction given in section 92B that it refers to a transaction between two or more associated enterprises. The term transaction has been defined in section 92F(v) and also in Rule 10A(d) of the Income-tax Rules, 1962. The Rule defines the term transaction to include: a number of closely linked transactions. On going through the above provisions, it becomes palpable that the Arm s length price is essentially determined on transaction-by-transaction approach for each international transaction separately; and for that purpose, a transaction in singular also includes plural for closely linked transactions. In other words, where the transactions are not closely linked, their ALP needs to be determined separately and such determination of the ALP of an international transaction as per section 92C(1) of the Act should be done as per the most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vs. ACIT (2016) 380 ITR 307 (P H) considered the question of aggregation of international transactions. Their Lordships laid down the principles of aggregation of international transactions by holding that several transactions between two or more AEs can form a single composite transaction if they are closely linked transactions and the onus is always on the assessee to establish that such transactions are part of an international transaction pursuant to an understanding between various members of a group. The Hon ble High Court observed that in case of a package deal where each item is not separately valued but all are given a composite price, these are one international transaction. Further, where a number of transactions are priced differently but on the understanding that the pricing was dependent upon the assessee accepting all of them together (i.e. either take all or leave all), then also they have been held to be taken as one international transaction. But the onus has been put on the assessee to prove that although each is priced separately, but they were provided under one composite agreement. It still further held that each component may be priced differently also, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We note that the facts of the instant case are similar to those of Magneti Marelli (supra) inasmuch as the assessee therein also paid royalty to its AE for use of Technical support for the manufacture of its products, and the Hon ble High Court did not approve clubbing of payment of technical fees with other transactions under the Manufacturing segment. In view of the foregoing discussion, it is held that the international transaction of payment of Royalty by the assessee for use of technical support cannot be clubbed with other international transactions under the Manufacturing segment. 11. Now we take up the ALP determination of the Royalty transaction on merits. In this regard, it is seen that the TPO applied Other method under Rule 10AB and selected 3 comparables as under : S.No. Name of the licensor Name of the foreign licensee Basis of royalty % on net sales 1 Turbodyne Technologies, Inc. and Turbodyne Systems, Inc. Honeywell International Inc. Net Sales 3.70% 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een paid for the same or similar uncontrolled transaction with or between non-AEs under similar circumstances. Unlike the first five specific methods, which contemplate comparison of the international transaction or specified domestic transaction of the assessee with actual comparable uncontrolled transactions, the last method also provides for considering the probable comparable uncontrolled transactions. The TPO has taken three comparable companies, which are though actual transactions, but have been found by him to be in the nature of similar transactions because of the wider sweep of the prescription of the method in selection of comparables also. The term similar uncontrolled transaction, along with the same, used in `other method is missing in the CUP and the TNM methods. Thus, it is overt that the TPO has gone with the wider comparability under the shelter of similar uncontrolled transactions, which is ostensible from the selection of comparables. The first comparable is the foreign licensee, namely, Honeywell International Inc. with a foreign licensor for the use of technical knowhow in respect of licensed products, namely, Motor driven Compressor products. The second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted party). Enclosure-1 to the Agreement shows that the technical knowhow was given to the Korean party for manufacturing Diesel Engines, being, the same product for which the assessee was licensed with. This indicates that the technical knowhow provided under this Agreement is of the same product in an uncontrolled transaction. Now let us examine the rates of Royalty charged by the assessee s AE from the assessee as well as the Korean party. The assessee s Agreement with its AE shows the rates of Royalty at 19.50 Euro per KW, which was charged for the year at 19.92 Euro per KW. The Agreement between the assessee s AE and Korean party gives the rate of Royalty at 23.80 Euro per KW. This explains that not only the product for which the assessee s AE charged Royalty from the assessee is similar to that for which technical knowhow was supplied to a Korean independent third party, but the rate charged from the assessee is also relatively lower. Similarly, the invoices of the assessee s AE raised on another independent Chinese party also show that the rate charged for the similar product is higher than that charged from the assessee. When same uncontrolled transaction is pitted agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise of this company, it is sine qua non to take note of the functions performed by the assessee under the international transaction. For this purpose, we have examined the Agreement between the assessee and its AE, under which the Design Engineering Services were rendered. A copy of such Agreement has been placed at page 267 onwards of the paper book. This Agreement provides for the assessee providing Engineering Support Services to its AE. The term Engineering Support Services has been defined in the definition section to include 3D version CAD models, 2D CAD drawings, quality assurance, data capture, cleaning and storage and data reports etc. Our attention has been invited towards the Annual report of Aabsys Information Technology Pvt. Ltd., whose copy has been placed at page 295 onwards of the paper book. The principal business activities of this company include Database Services with Data processing and Tabulation Services, Online Information and Data Retrieval Services, Electronic Data Interchange Services, Web search Portal Content Services, Code and Protocol Conversion Services etc. Total revenue of this company, as appearing in its Profit and loss account, is R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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