2021 (10) TMI 669

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....ed to royalty on account of TP adjustment in arm's length price as the Ld. CIT(A) has failed to appreciate the fact that the royalty payment is excessive and not at arm's length on consideration of AMP expenses. 1.2 The Ld. CIT(A) has also failed to appreciate the fact that in the new agreement, although the rate has been kept at 5% of "Net Sales", the methodology of computing the Net Sales was changed considerably, resulting in significant higher amount of royalty outgo. 1.3 The OECD guidelines also advocate that Arm's length pricing for intangible property must take into account for the purposes of comparability the perspective of both the transferor of the property and the transferee." 3. The assessee is a company incorp....

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.... the arm's length price in respect of the following transactions: Nature of Transactions Adjustment (in Rs.) Royalty Payment 15,66,27,250/- Managerial Remuneration to Director 7,54,77,412/- Total 23,21,04,662/- The Assessing Officer in accordance with the order of the TPO, made an addition of Rs. 23,21,04,662/- on account of transfer pricing in order dated January 31, 2017. 4. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. DR submitted that the TPO has observed that the formula for calculating net sales has also change from the earlier years. The TPO considered royalty payment as a separate international transaction and pr....