Transfer pricing and related-party payment scrutiny: appeal admitted on deletion of additions and RBI permission's effect on examination.

The Delhi High Court admitted the appeal and framed substantial questions of law on whether the Tribunal was right in deleting additions relating to alleged remuneration or royalty paid to 100% subsidiaries by applying section 40A(2)(b), section 92 and Article 9 of the treaty, and whether the Assessing Officer was barred from testing the reasonableness and genuineness of the payments merely because RBI permission had been obtained. The matter was accordingly set down for consideration on those questions.

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Issues: Whether the appeal should be admitted and the following substantial questions of law framed for consideration: (i) whether the Tribunal was correct in deleting the addition made on account of alleged remuneration or royalty paid to 100% subsidiaries of the holding companies by relying upon section 40A(2)(b), section 92 of the Income-tax Act, 1961 and Article 9 of the Double Taxation Avoidance Agreement; and (ii) whether the Tribunal was correct in holding that the Assessing Officer could not examine the reasonableness and genuineness of the alleged expenses or payments in view of the Reserve Bank of India permission.

Outcome: The appeal was admitted and the questions of law were framed for consideration.

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