TaxTMI 
TaxTMI 
2025 (4) TMI 2153
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....nt Unit, Income Tax Department ("Ld. AO") 1. That on the facts and circumstances of the case and in law, the final assessment order passed by the Ld. AO under Section 143(3) read with section 144C(13) and 144B of the Act is bad in law and liable to be quashed. 2. That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant, assessed under Section 143(3) read with Section 144C of the Act for AY 2020-21, at INR 45,54,77,147, as against the total income reported in the return of income ("ROI") amounting to INR 41,63,01,660. 3. That the Ld. AO/ Learned Deputy/Assistant Commissioner of Income-tax, Transfer Pricing Officer ("Ld. TPO")/Learned Dispute Resolution Panel ("Ld. DRP") have erred in enhancing the income of the Appellant by INR 33,732,149 on account of alleged difference in arm's length price ("ALP") for payment of royalty by Appellant to its Associated Enterprises ("AEs"). In doing so, the Ld. AO/Ld. TPO/Ld DRP have erred in: 3.1. altering the ALP as determined by the Appellant in the TP documentation maintained by it in terms of section 92D of the Act read with Rule 10D o....
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....Nos. 1 and 2 raised by the assessee is general in nature and does not require any specific adjudication. 4. The assessee Phinia Delphi India Pvt Ltd (formerly known as BorgWarner India Pvt. Ltd) was incorporated in 2017, engaged in the business of automotive component manufacturing (Fuel Delivery Module and canisters etc.), and trading, software development and testing of embedded software systems for the automotive industry, as well as provision of business & administrative support services to its associated enterprise ("AEs"). 5. In respect of international transaction entered into by the assessee, the functions performed, assets employed and risks assumed by assessee are described in detail in Transfer Pricing Study Report (TPSR). Amongst various international transactions carried out by the assessee, the disputed transactions before us are only with regard to payment of royalty of Rs. 10,95,86,010/- and interest on outstanding receivables. 6. Payment of royalty 6.1 The assessee has benchmarked the payment of royalty to be at Arm's Length Price using Comparable Uncontrolled Price (CUP) method. The ld TPO found certain deficiencies in the application of CUP. The ld TP....
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....ne Direct Injection ("GDI") product including GDI pump, GDI injector and GDI fuel rail for which it has paid a royalty @5% on net sales. 9. The assessee has chosen CUP method as the Most Appropriate Method (MAM) to benchmark the payment of royalty by using 40 comparables, out of which, 35 comparables agreements were rejected by the ld TPO on the ground of exclusivity and different product/ industry. It was submitted that the assessee had paid royalty @1% for trade marks (brand royalty) by taking both the exclusive and non-exclusive license comparable agreement. This method of adopting both exclusive and non-exclusive license comparable agreement was accepted by the ld TPO for payment of royalty of trademarks, whereas, when it comes to payment of royalty for technology knowhow, the same method has been rejected by the ld TPO. Out of 35 comparables rejected by the ld TPO, 3 comparable agreements which passed the criteria of non exclusivity as applied by the ld TPO ought to have been included as under:- Licensor Licensee Submission of the assessee Research Frontiers Incorporated Kerros Ltd The product for which the nonexclusive license (page 4 of agreement) was gr....
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....eby proving the product dissimilarity. Similarly, with regard to Special Devices Incorporated agreement with Davey Bickford Smith, on perusal of the said agreement, the ld CIT DR argued that it is a perpetual agreement whereas assessee's agreement is on year to year basis. With regard to Research Frontiers Incorporated agreement with BOS GmbH & Co. KG, the ld CIT DR submitted that it is similar to Research Frontiers incorporated agreement with Kerros Ltd. Accordingly, the ld DR argued that either there is a product dissimilarity on the comparable sought to be included by the ld AR or exclusive license agreement is purportedly granted making it un-comparable with the assessee. He further argued that in CUP method, basis of comparability and the parameters chosen thereon need to be very strict. 12. We are unable to comprehend ourselves to accept to the arguments advanced by the ld CIT DR in view of the fact that what is sought to be benchmarked here is the payment of royalty on technology knowhow and not for the product per se. Hence, product dissimilarity is of absolutely no relevance. Hence, we hold that the 3 comparable agreements which are sought to be included along with 5 co....