INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Computation of arm's length price - Transfer pricing adjustment made in respect of royalty payment -

Assessee was engaged in business of manufacture, sale and service of medical diagnostic equipments. AO made addition made on account of transfer pricing adjustment made in respect of royalty payment. Accordingly, TPO passed orders for all three years and determined the ALP of Royalty payments as NIL value. Royalty payment for assessment years 2002-03, 2003-04 and 2004-05 came to be disallowed by AO. Assessee submitted that ITAT had set aside the issue to TPO with direction to determine ALP after identifying a comparable and after selecting a method. ITAT had considered an identical issue in assessment years 2005-06 and 2006-07 also and restored the same to AO/TPO by following the order passed by it for assessment year 2002-03 to 2004-05. Held: Tribunal, in assessment year 2005-06 and 2006-07, had given a specific direction to the effect that, if TPO could not find any comparable in respect of royalty payment, then TPO/AO may consider the royalty payment as part of international transaction under trading segment and he may consider royalty payment as part of operating cost for purpose of computing margin in trading segment. TPO had followed alternative direction given by ITAT while giving effect to order of ITAT in assessment years 2005-06 and 2006-07. CIT(A) did not properly consider the direction given by ITAT on an identical issue in assessment years 2005-06 and 2006-07. Accordingly, matter was remanded back to AO/TPO in all the three years.

Followed:CIT & Anr. v. Yokogawa India Ltd. 2016 TaxPub(DT) 5139 (SC) and Toyota Kirloskar Motor (P.) Ltd. v. Asstt. CIT (2014) 166 TTJ 189 (Bang-Trib) : 2014 TaxPub(DT) 3049 (Bang-Trib).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2002-03 to 2004-05

INCOME TAX ACT, 1961

Section 10A

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