INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Royalty paid to AE - TPO determined nil ALP on the gorund of negative EBIT--Assessee filed additional evidences such as certificate from management certificate from Chartered Accountant pleading positive EBIT

Assessee engaged in contracting for integrated intelligent building automation management systems and providing integrated facilities management, real estate management, engineering services and trading in air-conditioning equipments and chillers claimed deduction of royalty paid to its AE abroad @ 1.5% of net sales. TPO held that since 'earnings before interest and tax' ('EBIT') of 'Project Activity' segment was negative, no royalty was required to be paid by assessee. Accordingly, AO made TP adjustment. Assessee explained that it had submitted a certificate from the management stating that 'Building efficiency' segment comprised of 'project activity' segment as well as 'Engineering segment' and the same was submitted before the Tribunal vide Letter, dated 11-12-2017. Further, it was stated that assessee had filed additional evidence before Tribunal vide Letter, dated 3-7-2019, i.e., a certificate from Chartered Accountant which supported contention of which were clarified in the letter from the Managing Director that Building Efficiency Segment (i.e. aggregate of Project Activity segment and Engineering segment) had a positive EBIT and accordingly royalty was paid as per royalty agreement. Held: Documents filed on 11-12-2017 and 3-7-2019 were quite relevant for the purpose of deciding the issue. Therefore, additional evidences were admitted and issue was remanded back to AO to pass an order after examining those documents.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 92C

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