Transfer Pricing Officer's Method Ruled Unsustainable for Ignoring Prescribed ALP Computation in Royalty Discrepancy Case.

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....Royalty receipts were subject to transfer pricing adjustment by TPO on basis of differences in amounts reflected in Form 3CEB of assessee vis-à-vis its group entities, without computing ALP by prescribed methods u/s 92C. TPO's approach of determining ALP merely based on differences in reporting by assessee and AEs, without considering functions, assets, risks involved in transactions, is ad-hoc and contrary to transfer pricing provisions. TPO must determine ALP by following prescribed methods; additions cannot be made on ad-hoc basis. Differences arose due to timing of revenue recognition under US GAAP followed by assessee. Major differences were reconciled; remaining differences were minimal, not warranting income addition. TPO's approach was held unsustainable in law.....