TaxTMI 
TaxTMI 
2011 (12) TMI 174
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of royalty payment of Rs. 14,47,956/- was suggested in respect of sales to the Associated Enterprise (AE), Mitsubishi Material Corporation, Japan, on the assumption that specific goods were manufactured for it and, therefore, no royalty was needed to be paid. The other grounds are in support of this ground. 2. The facts of the case are that the return was filed on 25.11.2006 declaring total income of Rs. 16,88,49,751/-. The return was processed on 19.12.2007. Subsequently, assessment proceedings were started by issuing notice u/s 143(2) of the Act. It was found that the assessee is engaged in the business of manufacturing precision forged bevel gears and synchronizer rings used in the automobile industry. 2.1 The report filed by the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee's export and domestic sales to AE, Mitsubishi Material Corporation (MMTL). It is in contract manufacturing where one group member produces goods for another group member since it is an independent company and part of Sone Group (Dr. Surinder Kapur and are not a group member of MMTL). To substantiate its CUP for royalty, assessee has submitted a similar approval relating to the produce in the automobile industry, for a third party. The approval dated 31st December, 1998 is of Government of India, Ministry of Industry, Department of Industrial Policy and Promotion to its sister concern, Sona Somic Components Ltd. for manufacture of ball joins assemblies to cars/commercial vehicles (Automobile Industry) with foreign collaboration ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be willing to transfer the property. From the perspective of the transferee, a comparable independent enterprise may or may not be prepared to pay such a price, depending on the value and usefulness of the intangible property to the transferee in its business. The transferee will generally be prepared to pay this license fee if the benefit it reasonably expects to secure from the use of the intangibles is satisfactory having regard to other options realistically available. Given that the licensee will have to undertake investments or otherwise incur expenditures to use the licence it has to be determined whether an independent enterprise would be prepared to pay a licence fee of the given amount considering the expected benefits from the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by making an addition of Rs. 14,47,956/- to the total income returned by the assessee. 4. Before us, the ld. counsel for the assessee submitted that similar issue arose in the proceedings of assessment year 2004-05 in the case of the assessee. The ld. CIT (Appeals) has deleted the disallowance made by the AO. The Tribunal has upheld the order of the ld. CIT(A). On the other hand, the ld. DR has relied on the orders of the AO and the DRP. 5. We have considered the facts of the case and submissions made before us. It is seen that the main question is whether the royalty paid by the assessee @ 3% of the net sale price stands justified under CUP. The assessee has placed on record a copy of the letter dated 30.04.1993 written by the Reserve B....