Itxa/447/2017 Of Commissioner Of Income Tax - Ltu v. Si Group-India Limited

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.447 OF 2017 Commissioner of Income Tax-LTUV/s.SI Group-India Limited … Appellant … Respondent --- Mr.Tejveer Singh Mastan Singh for the Appellant.Mr.Madhur Agarwal i/by Mr.Atul Jasani for the Respondent. --- CORAM : AKIL KURESHI AND S.J.KATHAWALLA, JJ. DATE : JUNE 03, 2019. P.C.:- 1.This appeal is filed by the revenue to challenge the judgment of the Income Tax Appellate Tribunal (“Tribunal” for short). Following questions are presented for our consideration:- “(a) Whether on the facts and in the circumstancesof the case and in law, the Tribunal was right indeleting the addition, relating to payment of royaltyu/s 92CA(3) of the Income Tax Act, 1961,amounting to Rs.3,80,99,599/- regarding the Arm'sLength Price arrived at by the TPO onInternational Transaction? (b)Whether on the facts and circumstances of thecase and in law, the Tribunal was right in allowingthe assessee's contention that as the payments ofRoyalty were approved by the Reserve Bank of India('RBI'), the same was at Arm's Length withoutappreciating the fact that the RBI approves only for payment toward technology transfer from FEMAangle and it should not be construed as approvalunder the provisions of any other law in force asper the Condition 7 of Press Note No.9 issued byMinistry of Commerce and Industry?” 2.Issues relate to the assessment year 2007-08. The assesseehad made purchase of raw material from associated enterprise,agreeing to pay 2% of the net sale amount by way of royalty.This transaction came up for consideration before the TransferPricing Officer who made adjustments primarily on the groundthat the assessee had not derived any specific benefits out ofsuch technology nor the assessee had received any incrementalbenefits on account of payment of such royalty amount. The TPOalso recorded that the assessee had not used any technologywhich was purchased and for which royalty payment for thesame. 3.CIT (Appeals) in a detailed order held that the TransferPricing Officer could not have judged the justification forpurchase of the know-how. In the appellate proceedings theassessee had established that such purchase was at Arm's Length Price by producing instances of similar purchases byunrelated parties. CIT (Appeals) accepted the same after callingfor remand report and deleted the addition. 4.The Tribunal confirmed the view of the CIT (Appeals)relying upon its own decision in case of the assessee for theassessment year 2006-07. 5.We have heard learned counsel for the parties and perusedthe documents on record. We do not find any error in view ofthe Tribunal confirming the decision of the CIT (Appeals). TheTransfer Pricing Officer could have applied any of the specifiedmethods for determining Arm's Length Price of the transaction,in case he was of the opinion that the purchase of know-howmade by the assessee from the associated enterprise was not atArm's Length. Instead of carrying out any such scientific exercise,the Transfer Pricing Officer went on to the justification of thepurchase made in the context of the incremental benefit earnedby the assessee out of such know-how. This was clearly notwithin the purview of the Transfer Pricing Officer. The Transfer Priya Soparkar 4 26 itxa 447-17-o Pricing Officer could not replace the assessee and question itsbusiness decision. In the context of the purchase being at Arm'sLength, the CIT(Appeals) had permitted the assessee to produceadditional evidence which was taken on record after remandreport and such evidence proved that the price paid by theassessee was at Arm's Length. No question of law arises. IncomeTax Appeal is dismissed. (S.J.KATHAWALLA, J.) (AKIL KURESHI, J.) ….