TaxTMI 
TaxTMI 
2017 (12) TMI 934
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.... of an international transaction, is premised upon the existence of one under Section 92B, calling for adjustment under Section 92C and in the present case, in fact, there was no such transaction; furthermore it is contended that in the absence of any comparable transaction between unrelated third parties or an unrelated third party and the assessee, the attribution of income could not have been made. 2. The facts are that the appellant used to provide expertise and also permit the use of its name "Dabur" by a UAE based entity Redrock. The arrangement was embodied in an agreement in terms of which the overseas entity Redrock paid royalty of 1%. The assessee acquired the shareholding in Redrock; this resulted in a name change - the....
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....- "9.9 The appellant has argued that agreement with Dabur International has become inoperative w.e.f. 01.04.2005 and hence there was no obligation on part of Dabur International to pay royalty. As discussed supra in para 9.4, since income arising from international transaction has to be determined having regards to arm's length price, existence of agreement or otherwise is not relevant. Therefore, argument of the appellant that agreement was not in operation during period under consideration is not relevant as price of international transaction is to be determined by TP regulations. The undisputed fact is that Dabur International Ltd. has been permitted to use Dabur brand name and the appellant had been receiving royalty incom....
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....of TPO's order. Rejecting this computation of the appellant, TPO has worked out royalty @ 4% of FOB sales. This approach of TPO is faulty because even if it is assumed that Dabur International has manufactured all its products by using technical know-how of Dabur India, royalty shall be payable @ 3% as per clause 4(a) above and in that case, sub-clause(b) shall not come into operation. However, considering the material furnished by the appellant, it is seen that products manufactured by Dabur International in UAE are different from those manufactured in India and in case of same name of products, it has been shown that oil base (raw material) is different from those products manufactured in India. Therefore, it can be safely inferred th....
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....in the present case, no comparable case has been brought on record by the TPO or the ld. CIT(A) while making adjustment on account of royalty. Moreover, no agreement was inforce to charge royalty from the AEs and that the FMCG products are new to the assessee who is known for its Herbal and Ayurveda products. In the instant case, it is not brought on record that the assessee had incurred any expenses for marketing the products manufactured by M/s Dabur International Ltd. (AE) in UAE and that the assessee either made any efforts or contributed any money for the establishment of its name in geographical area of UAE and the products manufactured by the UAE were not different from the products manufactured in India by the assessee. Moreover, th....
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....entered into the business of FMCG products which were earlier manufactured by the Redrock Ltd. with its own technology as per the requirement and taste of a local public of UAE by keeping into consideration the geographical and market situation. The said company was acquired by the assessee and now for the manufacturing of its products, the assessee did not provide any market strategies, nothing is brought on record that the assessee had borne the expenses, provided the funds or compensated for market failure and the quality etc. It, therefore, appears that the assessee had not made any effort for establishing the trade name nor had made any other contribution. Therefore, the assessee did not receive any royalty for the year under consid....
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....having regard to the conspectus of facts, no infirmity can be found with the ITAT's approach. If the assessee's submissions were to be accepted arguendo, the omission by a party to indicate, an initial income, which was concededly being shown in the past as an international transaction, cannot be scrutinized at all. Such an absolute proposition is not possible to support. The assessee is only to explain why the Dabur brand has been permitted to an overseas entity - of which it is the present sole or principal shareholder. That it was not such a sole shareholder in the past is an admitted fact. Equally, with the same overseas entity, when the ownership was of a different pattern, royalty was charged for the use of the Dabur brand. Unless at ....