2023 (2) TMI 1306

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.... undertaken by the assessee with its Associated Enterprises (AE). The TPO, vide order dated 30.07.2021 proposed TP adjustments with regard to Royalty payment of a sum of Rs. 58,50,48,059/- by restricting the ALP on Royalty at 1% (assessee had claimed payment of 4%). On receipt of TPO's order the Assessing Officer (AO) passed draft assessment order on 29.09.2021 under Section 143(3) r.w.s. 144C of the Act. In the said draft assessment order the AO incorporated the TP adjustment proposed by the TPO and also made certain corporate tax disallowance/additions. 3. Aggrieved by the draft assessment order the assessee filed objections before the DRP on 28.10.2021. The DRP, vide its order dated 14,06.2022, disposed off the objections of the assessee. As regards the TP adjustments are concerned the DRP confirmed the view taken by the TPO. As regards the corporate tax issues are concerned, the DRP partially granted relief to the assessee. Pursuant to the DRP's directions the impugned final assessment order dated 29.07.2022 was passed under Section 143(3) r.w.s. 144C(13) of the Act. 4. Aggrieved by the final assessment order, the assessee has filed the present appeal before the Tribunal rais....

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....ination of arm's length price in relation to an international transaction under CUP. f. Erred in not appreciating the similar licensing arrangement entered among group companies as these agreements provide persuasive value and support that the licensing of intangibles and services has been compensated as per the group policy. g. Erred in not considering the judicial precedent issued by Hon'ble Income Tax Appellate Tribunal ("ITAT"), Bangalore in the Appellant's own case for AY 2009-10, AY 2010-11, AY 2011-12 and AY 2012-13. 5.4. The Ld. TPO erred in disregarding the TNMM analysis provided by the Assessee as a supplementary analysis to demonstrate the arm's length nature of the international transaction pertaining to payment of royalty. 5.5. Without prejudice, the Ld. AO/ Ld. TPO/ Hon'ble DRP erred in not appreciating the fact that aggregation of closely linked transactions while applying TNMM is an appropriate approach that has been suggested by the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations laid down by the Organisation for Economic Co-Operation and Development ("OECD Guidelines") and referred for guidance in v....

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..../2016 (supra) decided the issue in favour of the assessee. The relevant finding of the Tribunal reads as follows:- "9. The first issue we will take up the transfer pricing adjustment made by the TPO with respect to payment of royalty @ 1%. 10. The ld.AR submitted that this issue is covered in assessee's own case in ITA No. 506/Bang/2016 vide order dated 6/12/2021 for the asst. year 2011-12 wherein the coordinate bench of this Tribunal has allowed the appeal in favour of the assessee. 11. The ld. DR relied on the written submissions. 12. We have heard the rival submissions and perused the materials on record. We notice that the coordinate bench of the Tribunal in assessee's own case (Supra) has held that - "7.4 We have heard rival submissions and perused the material on record. The Tribunal in assessee's own case for assessment year 2009- 2010 in IT(TP)A No. 315/Bang/2014 (order dated 31.03.2017) and for assessment year 2010-2011 in IT(TP)A No. 361/Bang/2015 (order dated 04.06.2018) had restored the issue of determination of ALP for payment of royalty to the files of the TPO. The TPO, pursuant to the Tribunal's order, passed orders accepting the payment of royalty at ....

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....ld that payment of royalty @ 4% is at arm's length." 11. In view of the above order of the Tribunal, in assessee's own case (supra), we hold that payment of royalty at 4% on sale is to be treated at arm's length. It is ordered accordingly." 9. In view of the above order of the Tribunal which is identical facts of the instant case (since the agreement for payment of Royalty is the same for earlier years and the relevant AY) we hold that the payment of Royalty at 4% is to treated at ALP. It is ordered accordingly. 10. In the result Ground No. 5 and its sub-grounds are allowed. Ground No. 6.3 (Corporate Tax) 11. The AO in the draft assessment order had made an addition of Rs.32,72,532/- being notional interest while computing the total income for AY 2018-19. The DRP, vide its directions dated 14.06.2021, had rejected the objections of the assessee. However, the DRP vide corrigendum dated 28.07.2022 directed the AO to re-examine the issue of addition of interest income amounting to Rs.32,72,532/-. The AO, pursuant to the corrigendum issued by the DPR, again made addition of notional interest of Rs.32,72,532/-. The relevant observations of the AO in the final assessment order r....