Royalty receipts were subject to transfer pricing adjustment by TPO on basis of differences in amounts...

Royalty receipts were subject to transfer pricing adjustment by TPO on basis of differences in amounts reflected in Form 3CEB of assessee vis-à-vis its group entities, without computing ALP by prescribed methods u/s 92C. TPO's approach of determining ALP merely based on differences in reporting by assessee and AEs, without considering functions, assets, risks involved in transactions, is ad-hoc and contrary to transfer pricing provisions. TPO must determine ALP by following prescribed methods; additions cannot be made on ad-hoc basis. Differences arose due to timing of revenue recognition under US GAAP followed by assessee. Major differences were reconciled; remaining differences were minimal, not warranting income addition. TPO's approach was held unsustainable in law. .....

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