TaxTMI 
TaxTMI 
2023 (3) TMI 1023
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.... Officer (TPO for short ) ,on account of determination of arm's length price ("ALP" for short) of the international transactions of royalty paid by the assessee to its AE, GM Daewoo Auto & Technology Company ("GMDAT" for short)), having been adjudicated by the ITAT noting incorrect facts to the effect that the assessee had nothing to say to the comparables selected by the TPO for arriving at the ALP of the impugned transaction.The ld.counsel for the assessee pointed out that the ITAT accepted the assessee's plea noting that the assessee had made arguments countering the comparable selected by the TPO in the first round of litigation ,which were not considered by the ITAT in the second round of litigation, and therefore, there was an apparent mistake in the order of the ITAT, while adjudicating this issue. He pointed out that accordingly, this issue was directed to be adjudicated afresh and in pursuance to the same, the hearing before us today. The ld.counsel for the assessee, therefore, contended that the solitary issue to be adjudicated was with regard to the adjustment made by the TPO to the international transaction of royalty paid by the assessee i.e. General Motors India Pv....
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....paid royalty to GMDAT. The TPO found that royalty rates mentioned in this independent party agreement was 3%, and finding these royalty agreement to be exactly comparable to the assessee's royalty agreement relating to similar technology of GMDAT for which the assessee has paid royalty, he treated the comparables selected by him to be the correct comparables and rejected the internal CUP of the assessee. Accordingly, the ALP of royalty payment was determined at the rate of 3% as against 5% made by the assessee resulting in upward adjustment of royalty payment amounting to Rs.4,89,60,504/-. The assessee objected to this upward adjustment to the DRP who dismissed the objection of the assessee upholding order of the TPO in this regard. The matter thereafter travelled upto the ITAT, and the ITAT vide their order dated 2.8.2013 in ITA No.3308/Ahd/2011, noted that the DRP had not analysed the contention put forth by the assessee and had not considered the relevant terms and conditions of the agreement relied upon by both the assessee and the TPO of the respective comparables selected by them while deciding the issue. The ITAT therefore was of the view that the matter needed to be conside....
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....ment of the assessee with GMDAT was identical with that between Isuzu and GMDAT, being payment of royalty for transfer of technology for assembling entire vehicle (emphasis supplied by us), Optra in the case of the assessee and Tavera in the case of Isuzu. He pointed out that comparables selected by the TPO on the other hand were Delphi- Jinzhou agreement and Namyang Henglong agreement. The ld.counsel for the assessee pointed out that both these agreement for payment of royalty was for providing technology for manufacturing of single component and not for assembling of entire vehicles, and therefore, could not be said to be comparable with the royalty agreement of the assessee with GMAT which was paid for transfer of technology for assembling of entire vehicle. Further, he pointed out that comparables selected by the TPO besides having variable components for the royalty payment at the rate of 3% of net selling price, also had fixed component of USD 80,000 in the case of comparable no.1 i.e. Delphi-Zinzhou agreement, and USD of 1,00,000 in the case of comparable no.2 i.e. Namyang-Henglong, which had been considered by the TPO. He drew our attention to the copies of agreement of the....
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....ad noted that this specific contention of the assessee, that the comparables selected by the TPO were not correct comparables, had not been considered by the DRP while upholding the order of the TPO. Accordingly, the issue has been restored to the TPO who in the second round upheld the order passed by him in the first round noting that the assessee had nothing new to say. 7. We have considered the contentions of both the parties and have also gone through copies of the agreement of all the comparable cases selected by both the assessee and the TPO, and we find merit in the contentions of the ld.counsel for the assessee. It is a fact on record and has not been denied by the Revenue, that the assessee's agreement for payment of royalty was for transfer of technology for assembling of entire vehicle and similarly also in the case of comparable selected by the assessee royalty was paid for transfer of technology for assembling of entire vehicles. The comparable selected by the Revenue on the other hand, are for transfer of technology for manufacturing of particular part of the vehicles. Surely technology for assembling vehicles and that for manufacturing a particular part cannot ....
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.... However, it noticed from the original TP order for AY 2007-08 that during original TP proceedings, the search of ADGAR online database (which is based on SEC filings) was carried out to search for royalty agreement for independent parties related to assemblies for automobiles, and accordingly two agreements were found and one of these agreements were related to GMDAT's, M-150 and M-200 project itself i.e. the project for which assessee has paid royalty to M/s. GMDAT. This agreement was exactly the same on account of product royalty with the assessee's product royalty agreement. Accordingly a show cause notice issued to the assessee proposing to use the above agreement as CUP to benchmark the ALP of royalty payment. In its reply dated 30.9.2010 assessee had stated that it has benchmarked its transactions with internal CUP available on similar agreement with the third party i.e. Isuzu Motors Limited, Japan to obtain certain technical information and assistance in relation to manufacturing of Tavera in India and as per this agreement, Isuzu charged royalty at the rate of 5% of net selling price to the assessee for providing technical infor....