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The ITAT set aside the DRP's order regarding transfer pricing adjustments for royalty payments, directing the matter back to the TPO for further examination to establish the arm's length price using internal CUP as the most appropriate method. Alternatively, a mean arm's length royalty rate of 5.20% derived from external CUP agreements was deemed appropriate. The Tribunal relied on EKL Appliances Ltd. and Technimont ICB Pvt. Ltd. precedents, confirming that expenditure cannot be disallowed on grounds of necessity or prudence, and ALP determination requires comparison with uncontrolled transactions. The ITAT also deleted the TP adjustment related to AMP expenditure, recognizing the appellant as a full-fledged telecom service provider rather than a mere distributor, and noting the expenses were inextricably linked to business operations.
The ITAT set aside the DRP's order regarding transfer pricing adjustments for royalty payments, directing the matter back to the TPO for further examination to establish the arm's length price using internal CUP as the most appropriate method. Alternatively, a mean arm's length royalty rate of 5.20% derived from external CUP agreements was deemed appropriate. The Tribunal relied on EKL Appliances Ltd. and Technimont ICB Pvt. Ltd. precedents, confirming that expenditure cannot be disallowed on grounds of necessity or prudence, and ALP determination requires comparison with uncontrolled transactions. The ITAT also deleted the TP adjustment related to AMP expenditure, recognizing the appellant as a full-fledged telecom service provider rather than a mere distributor, and noting the expenses were inextricably linked to business operations.
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