TaxTMI 
TaxTMI 
2016 (9) TMI 1597
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....the relevant financial year, the assessee paid royalty of Rs. 27,16,107 on export sales of Rs. 13,35,82,370 which worked-out to 2.03%. According to the TPO, relief to be allowed as deduction should be restricted to 1% of the export sales, based on the order of the Coordinate Bench of ITAT, Hyderabad in assessee's own case for the earlier years. Following the same, the Assessing Officer worked-out the ALP adjustment of royalty at Rs. 13,35,804 as against the royalty actually paid of Rs. 27,16,107 and arrived at the adjustment of Rs. 13,80,304 and disallowed the same and brought it to tax. The assessee raised objections before the DRP who confirmed the order of the Assessing Officer and the assessee is in appeal before us. 3. According to the assessee, the royalty is paid for the use of trade mark "Gulf" in India and also for providing technical information of compounding, testing and packaging and application of products and license to use the trade mark and design/indicia on products and therefore, is reasonable and is at arms length price for the following reasons : a) The percentage of payment of royalty by third parties to other hubs is more than what was paid by the appellan....
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....ly, assessee claimed an amount of Rs. 2,76,58,080/- for the year ending 31st March, 2006. The entire royalty for A.Y. 2006-2007 was disallowed by the TPO, which was confirmed by the DRP. 12. It was submitted that on the basis of the same agreement for the same services rendered, the entire royalty paid at Rs. 3,00,01,312/- was disallowed in next A.Y. 2007- 2008 and the very same factual position was placed before the DRP. The DRP in that year has allowed the royalty on the internal sales/domestic sales whereas, the royalty on export sales were restricted to 1%. 13. Learned Counsel referred to the relevant portion of the DRP order dated 20.09.2011 for A.Y. 2007-2008 wherein it was held that "given the above internal CUP information there is no need for the TPO to have disallowed the royalty payments and determine ALP CUP as NIL." Accordingly, the objection relating to royalty payment on domestic sale was allowed and with regard to royalty payment on export sales the same was allowed in part to the extent of 1% of export sales. It was further submitted that in A.Y. 2008-2009 also the DRP has followed similar orders and in later year i.e., A.Y. 2009-2010 also the TPO himself h....
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....unt of Rs. 62,29,972/- Assessing Officer is directed to allow royalty at Rs. 18,05,788/- and balance amount of Rs. 44,24,184/- stands disallowed. 17. Learned Counsel relied on the decision of the Coordinate Bench in the case of Kinetic Motor Ltd. Vs. JCIT 77 ITD 393 to submit that once the agreement was approved by the Government of India, no disallowance is required to be made. We have perused the said decision and noticed that the assessment year involved was A.Y. 1995-1996 and royalty claim was allowed by the A.O. in the immediate preceding year i.e., A.Y. 1994-1995. Accordingly, the ITAT held that though the principles of resjudicata does not apply to the decision of the I.T. authorities, yet, on the same facts, the assessee cannot deny the benefit given in the preceding year. The same was upheld by the Hon'ble High Court. We are of the opinion that the said facts of the case are entirely different to the facts in this case. Therefore, the precedent of the decision cannot be followed here. Moreover, this is not a disallowance under section 37(1) but an adjustment made under Transfer Pricing Provisions where arms length price is to be determined, whether the agreement is appr....
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....ervices rendered outside the country. Both above vendors are not have any permanent establishment in India. They are not liable to tax in India. The Assessing Officer was clearly in error in disallowing the said amount because of not submitting the copy of From 15CA. The provisions of TDS are not attracted to these payments. Submission : 1. The sum of Rs. 44,86,063/- was paid to C & C Maritime Pte Limited Singapore, towards reimbursement freight charges paid to shipping Company for trans-shipment of raw material. A further sum of Rs. 1,10,979/was paid towards brokerage & commission to M/s East Port Maritime Pte Limited for arranging vessel in Singapore for import of raw material. Both the parties to whom the payments are made have not rendered any services in India. They do not have any permanent establishment in India. Hence, the provisions of TDS are not attracted in respect of the above payments. Even otherwise, both the amounts paid constitute the cost of raw material. The provisions of TDS are inapplicable where the assessee purchases raw material from a non-resident for its production. There is no TDS payment on the cost of raw material purchases. As such, the same can....