TaxTMI 
TaxTMI 
2016 (12) TMI 1588
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....d 31.05.2016 u/s. 143(3) r.w.s. 144C (1) of the Act. 2. The only issue for our consideration is with regard to Transfer Pricing (T.P) adjustments of Rs. 78,57,058/- towards "management services". 3. The facts of the case are that the assessee company, i.e. M/s. Control Techniques India Pvt. Ltd. is a wholly owned subsidiary of Control Techniques Ltd., United Kingdom (CTL, UK). The assessee company is engaged in the business of manufacturing drives and control applications which are used in controlling speed, voltage etc., and has application in offset printer machines, newspaper printing machines, cement plates, textile industries etc. The Control Techniques Group is involved in the business of electronic control, variable spee....
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.... the profits outside India by manipulating the prices. Hence, the DRP did not accept the assessee's contention. 3.1 According to DRP, the TPO has examined the agreements entered into by the assessee with its AE as well as the email correspondence between them, but he found that the activities for which payments had been made were in the nature of stewardship only and thus do not require to be remunerated separately. The TPO has discussed in detail the nature of various services, claimed to have been received by the assessee from its AE. However, the important fact is that the assessee failed to produce any document to substantiate its claim that many of these services were actually rendered by the AE to it. Wherever necessary details ....
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....hich is more than 55% of' the total payment in relation to such services. So assessee cannot run away from the onus cast on it to prove that these services were actually received by it. Before DRP, the assessee's claim (and later in written submissions dt 25 May 2016) that it has not documented its entire communication in relation to services received by it. Hence, DRP observed that as the onus was on the assessee to maintain sufficient records to prove its claim before the tax above, this Panel does not find any merits in the objections of the assessee and rejected the assessee's claim. Consequently, the AO passed the final order. Against this, the assessee is in appeal before us. 4. We have heard both the parties and perused the materi....
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....n question mainly on the basis of the benefit test. In this regard, it is seen that the payment of royalty cannot be examined divorced from the production and sales. Royalty is inextricably linked with these activities. In the absence of production and sale of products, there would be no question arising regarding payment of any royalty. Rule 1 OA(d) of the ITAT Rules defines 'transaction' as a number of closely linked transactions. Royalty, then, is a transaction closely linked with production and sales. It cannot be segregated from these activities of an enterprise, being embedded therein. That being so, royalty cannot be considered and examined in isolation on a standalone basis. Royalty is to be calculated on a specified agreed basis, o....
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.... has been accepted by the department as having been made by the assessee wholly and exclusively for its business purposes. For Assessment Years 2004-05 and 2005-06, such payment of royalty has been allowed by the CIT (A). As per the FEMA Regulations, royalty can be paid on net sales @ 5% on domestic sales and @ 8% on export sales. The royalty payment by the assessee falls within these limits. ft also falls within the limits of payment of royalty in the auto mobile sector, as per the market trend. This payment of royalty is at the same percentage as that paid by other auto ancillaries in the automotive industry. Then, in 'Ekia Appliances' (supra) and in 'Ericsson India Pvt. Ltd. vs. DCIT', 2012-TII-48-ITAT-Del- TP, it has been held that roya....
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....disallow the same on any extraneous reasoning. Thus, according to the ld.A.R, the AO has no jurisdiction to nullify the transaction, when the expenditure was incurred for the purpose of business and operating margin of assessee higher than the arithmetic mean of the operating margin of the comparables. In principle, we agree with the argument of the ld. A.R. However, we find from the order of lower authorities that TPO wanted the assessee to show that services were actually rendered to the assessee and payment was made for the same, also it was noted by the DRP that the invoices submitted by the assessee pertaining to the fees paid by the assessee to its AE for registration of patents developed by AE in their own country with hardly anythin....