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The Tax Publishers JCB India Ltd. v. Dy. CIT [ITA No. 1075 (Del) of 2016, 31-3-2016] : 2016 TaxPub(DT) 1740 (Del-Trib) Royalty to parent whether allowable under TP *Facts:* Assessee subsidiary had paid royalty to group parent w.e.f. 2005 @ 5% on local sales and @ 8% on export sales on a new India developed model called 3DX. No royalty was paid on earlier model 3D. TPO felt no benefit arose out of royalty and decided it as NIL as earlier years. DRP allowed 0.25% royalty for earlier years on ad hoc basis. Assessee adopted TNMM for benchmarking. TPO adopted CUP as royalty was a separate transaction. Same was done for this asst. year as well. On appeal: Held in favour of assessee as under: ALP requires adjudication by TPO thus remanded. TPO's scope is ALP computation assessing officer's scope is benefit test under section 37. TPO addition has to be adopted by assessing officer but if no addition is done by TPO still assessing officer may sustain an add back under section 37 or section 40a(ia) if applicable for instance. Issue in question was determination of ALP @ NIL and @ ad hoc by DRP @ 0.25%. This is why case requires remand for fair hearing. CUP is apt for royalty in place of aggregation under TNMM.

The Tax Publishers

JCB India Ltd. v. Dy. CIT [ITA No. 1075 (Del) of 2016, 31-3-2016] : 2016 TaxPub(DT) 1740 (Del-Trib)

Royalty to parent whether allowable under TP

Facts:

Assessee subsidiary had paid royalty to group parent w.e.f. 2005 @ 5% on local sales and @ 8% on export sales on a new India developed model called 3DX. No royalty was paid on earlier model 3D. TPO felt no benefit arose out of royalty and decided it as NIL as earlier years. DRP allowed 0.25% royalty for earlier years on ad hoc basis. Assessee adopted TNMM for benchmarking. TPO adopted CUP as royalty was a separate transaction. Same was done for this asst. year as well. On appeal:

Held in favour of assessee as under:

ALP requires adjudication by TPO thus remanded. TPO's scope is ALP computation assessing officer's scope is benefit test under section 37. TPO addition has to be adopted by assessing officer but if no addition is done by TPO still assessing officer may sustain an add back under section 37 or section 40a(ia) if applicable for instance. Issue in question was determination of ALP @ NIL and @ ad hoc by DRP @ 0.25%. This is why case requires remand for fair hearing. CUP is apt for royalty in place of aggregation under TNMM.