DCIT, New Delhi V. M/s Bestexx MM India Pvt Ltd, New Delhi

ITA 544/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3358 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K CHAUDHARY
• Keywords: Transfer pricing; International transaction; Additional evidence
• Section: 143(3); 92D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2 NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.544/DEL/2015 ASSESSMENT YEAR: 2009-10 DCIT, CIRCLE-4(2), NEW DELHI. VS. M/S. BESTEXX MM INDIA PVT. LTD., JE-9/104, KHIRKI EXTN. MALVIYA NAGAR, OPP. M-BLOCK MARKET, TIKONA PARK, NEW DELHI. TAN/PAN: AACCB 8837H (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: H.K. CHAUDHARY, CIT-DR DATE OF HEARING: 08 02 2018 DATE OF PRONOUNCEMENT: 15 02 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FIELD BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 19.11.2014, PASSED BY LD. CIT(APPEALS)-44, NEW DELHI FOR THE QUANTUM OF ASSES SMENT PASSED U/S.144C R.W.S. 143(3) FOR THE ASSESSMENT YE AR 2009- 10. THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 91,42,654/- MADE ON ACCOUNT OF TRAN SFER PRICING ADJUSTMENT IN RESPECT OF ROYALTY. 2. THE LD. CIT (A), HAS ALLOWED THE RELIEF TO THE A SSESSEE WITHOUT APPRECIATING THAT THE CUP WAS NEVER FURNISH ED BEFORE THE TPO. I.T.A. NO.544/DEL/2015 2 3. THE LD. CIT (A), HAS ERRED IN LAW AND ON FACTS A CCEPTING THE FRESH DOCUMENTATION WHICH IS IN CONTRAVENTION OF RU LE 10D READ WITH SECTION 92D OF THE INCOME TAX ACT, 1961. 4. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS WI THOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY HAD MADE PAYMENT OF ROYALTY OF RS. 91,42,654/- WITHOUT ANY B ENEFIT ACCRUING TO IT. 5. THE LD. CIT (A) HAS ERRED IN IGNORING THE FACT T HAT THE ASSESSEE WAS ALSO MAKING PAYMENT OF FEE FOR TECHNIC AL KNOW- HOW. 6. THE CIT (A) HAS ERRED IN NOT APPRECIATING THAT N O INDEPENDENT PARTY WOULD HAVE MADE PAYMENT OF ROYALT Y UNDER THESE CIRCUMSTANCES. 7. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL 2. NOTICE WAS SENT TO THE RESPONDENT-ASSESSEE THROU GH SPEED POST AT THE ADDRESS MENTIONED IN FORM-36, H OWEVER, THE SAID NOTICE HAS BEEN RETURNED BACK UNSERVED AS ON THE GIVEN ADDRESS THE RESPONDENT COMPANY WAS NOT THERE, ACCORDINGLY, WE ARE PROCEEDING TO DECIDE THE APPEAL EXPARTE QUA THE RESPONDENT ON MERITS AFTER CONSIDERING THE MATERIAL ON RECORD AND HEARING THE LEARNED DEPARTMENT REPRESENTATIVE. 3. THE BRIEF FACTS ARE THAT ASSESSEE-COMPANY IS A SUBSIDIARY OF BESTEX KYOEI COMPANY LTD. AND IS PRIM ARILY ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOT IVE COMPONENTS. THE ASSESSEE HAS ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS. I.T.A. NO.544/DEL/2015 3 INTERNATIONAL TRANSACTION METHOD VALUE (INR) CLASS - I PURCHASE OF FIXED ASSETS (INCLUDING SUPERVISORY FEES OF R.S 8012947, CAPITALIZED DURING THE YEAR') CPM/TNMM 12045798 PURCHASE OF RAW MATERIAL 1386622 CLASS - II REIMBURS EMENT OF TRAVELLING EXPENSES CUP 25804228 REIMBURSEMENT OF SALARY CUP 22270853 CLASS - ILL PAYMENT OF TECHNICAL FEE CUP 54747151 CLASS - IV INTEREST ON EXTERNAL COMMERCIAL LOAN CUP CLASS-V PAYMENT OF ROYALTY CUP 9142654 CLASS-VI SALE OF SAMPLE CPM 33255 4. SO FAR AS THE TRANSACTION OF ROYALTY PAYMENT IS CONCERN, THE TPO OBSERVED THAT ROYALTY PAYMENT AMOU NTING TO RS.91,42,654/- WAS PAID TO ITS AE, WHICH HAS BEEN S TATED TO BE FOR NON EXCLUSIVE RIGHT OF LICENSE TO USE OF THE TECHNOLOGY INCLUDING KNOWHOW OF ITS AE FOR THE PURPOSE OF CARR YING ON MANUFACTURING OF AUTOMOTIVE COMPONENTS IN INDIA. IN CONSIDERATION TO THE LICENSE AND RIGHTS AVAILED, TH E ASSESSEE HAD TO PAY ROYALTY TO ITS AE @ 3% OF SALES IN TERMS OF THE AGREEMENT. FOR THE PURPOSE OF BENCH MARKING THE SAI D TRANSACTION, THE ASSESSEE APPLIED CUP METHOD AS THE MOST APPROPRIATE METHOD, CONSIDERING THE RATE OF ROYALTI ES SPECIFIED UNDER FEMA REGULATIONS. THE ASSESSEE HAS ALSO SUBMI TTED THAT M/S. HINDUSTAN MOTORS LTD. HAD ENTERED INTO AN AGREEMENT FOR PROVISION OF TECHNOLOGY WITH MITSUBI SHI I.T.A. NO.544/DEL/2015 4 CORPORATION FOR PROVISION OF TECHNOLOGY, FOR WHICH HINDUSTAN MOTORS LTD. WAS PAYING @ 5% OF SALES APART FROM TE CHNICAL ASSISTANCE FEE. SINCE THE RATE WHICH HAS BEEN PAID BY THE ASSESSEE IS BELOW 5%, THEREFORE, IT WAS STATED THAT IT MEETS THE ARMS LENGTH REQUIREMENT. APART FROM THAT, THE LIMIT PRESCRIBED BY THE RESERVE BANK OF INDIA IN CASES OF ROYALTY IS @ 5%; AND BY THAT STANDARD ALSO, ASSESSEE IS WITHIN THE ARMS LENGTH RANGE. HOWEVER, THE LEARNED TPO HAS COMPUTED THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY AT NIL, HOLDING THAT NO BENEFIT HAS BE EN RECEIVED BY THE ASSESSEE FOR THE USE OF TECHNOLOGY. HIS RELEVAN T OBSERVATIONS READS AS UNDER:- THE TRANSACTION IS THEREFORE BEING BENCHMARKED BY APPLYING THE BENEFIT TEST WHICH IS AN INTERNATIONALLY ACCEPTED METHOD. UNDER THIS TEST IT IS TO BE SEEN AS TO WHETHER THE TAXPAY ER HAS RECEIVED ANY TANGIBLE BENEFIT FROM THE USE OF THE INTANGIBLE WHICH WOULD HELP IT IN EARNING GREATER ECONOMIC BENEFIT. IN ARM S LENGTH SITUATION A PERSON WOULD PAY ROYALTY ONLY IF THE US E OF TECHNOLOGY WILL GIVE HIM GREATER ECONOMIC BENEFIT. IN THE PRESENT CASE, AS DISCUSSED ABOVE, DESPITE THE USE OF THE IN TANGIBLE, THE ASSESSEE HAS A LOSS AT THE NET LEVEL. THIS CLEARLY SHOWS THAT TECHNIQUES OR BRANDING HAS NOT PROVIDED ANY BENEFIT TO THE ASSESSEE. NO INDEPENDENT PERSON IN SUCH A SITUATION WILL PAY ANY ROYALTY. THIS VIEW IS ALSO SUPPORTED BY THE ITA T, DELHIS DECISION IN THE CASE OF ABHISHEK AUTO [2010-TII-54- ITAT-DEL-TP] WHEREIN THE ITAT HELD AS UNDER: IF THE TESTED PARTY WITHOUT THE USE OF IMPORTED TE CHNOLOGY AND IMPORTED RAW MATERIAL CAN MAKE ADDITIONAL MARGINS, THEN IT WOULD BE A CASE WHICH MAY REQUIRE AN ADJUSTMENT, BU T IN THIS I.T.A. NO.544/DEL/2015 5 CASE THE INTERNATIONAL TRANSACTIONS HAVE DEMONSTRAT IVELY BOOSTED THE PROFITS OF THE APPELLANT. IN VIEW OF THE ABOVE DISCUSSION AND PARTICULARLY KE EPING IN VIEW THE FACT THAT THE ASSESSEE HAS NEITHER BENCHMARKED THIS TRANSACTION PROPERLY BY APPLYING THE MOST APPROPRIA TE METHOD AND NOR HAS IT FURNISHED THE REQUISITE INFORMATION I AM CONSTRAINED TO DETERMINE THE ARMS LENGTH PRICE OF THIS TRANSACTION AT NIL UNDER CUP METHOD. NO INDEPENDENT PERSON IN SIMILAR CIRCUMSTANCES WOULD PAY ANY SUCH ROYALTY. 5. VARIOUS DECISIONS OF THE TRIBUNAL AS RELIED UPON BY THE ASSESSEE IN SUPPORT OF ITS CASE HAVE BEEN DISTI NGUISHED BY THE AO. ACCORDINGLY, THE ENTIRE ROYALTY PAYMENT HAS BEEN ADJUSTED AFTER TAKING THE ALP AT NIL AND ADDITION O F RS. 91,42,654/- WAS MADE. 6. BEFORE THE LD. CIT (A), THE ASSESSEE BESIDES MAK ING ELABORATE SUBMISSIONS, FILED ADDITIONAL EVIDENCES I N THE FORM OF INSTANCES OF ROYALTY PAID IN COMPARABLE CASES BY THE UNCONTROLLED THIRD PARTIES FOR THE PURPOSE OF BENCH MARKING THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY . VARIOUS EXTERNAL COMPARABLES WERE GIVEN FOR THE PURPOSE OF EXTERNAL CUP TO DEMONSTRATE THAT AVERAGE RATE OF ROYALTY ACR OSS THE INDUSTRY WAS AROUND 3%, WHEREAS ASSESSEE HAS PAID R OYALTY TO ITS AE EFFECTIVELY @ 3.15% OF THE NET SALES WHIC H IS COMPARABLE TO THE ROYALTY PAID IN COMPARABLE UNCONT ROLLED TRANSACTIONS. THE LIST OF SUCH COMPARABLES SUBMITTE D BY THE ASSESSEE ARE AS UNDER:- I.T.A. NO.544/DEL/2015 6 LICENSOR LICENSEE LICENSOR COUNTRY LICENSEE COUNTRY EFFECTIVE DATE ROYALTY RATE DATABASE RELIED DESCRIPTION DAVID T. ST. JAMES, INDIVIDUAL TURBODYNE SYSTEMS, INC.; TURBODYNE TECHNOLOGIES, INC. MONTECITO, CA CARPINTERIA CA 10/15/ 2001 2.00% ROYALTY STAT EXCLUSIVE TECHNOLOGY AND PATENT LICENSE TO MAKE USE AND SELL PRODUCTS RELATED TO AN ELECTRICALLY ASSISTED ENGINE CHARGING SYSTEM, AN INTELLIGENT ENGINE AIR INTAKE SYSTEM, AND AN EXHAUST GAS DRIVEN ELECTRIC GENERATING SYSTEM, WITH RIGHT TO SUBLICENSE. E.T.C. INDUSTRIES LTD. DIRECTION TECHNOLOGIES INC. VANCOUVER BLAINE, WA 1/9/ 1999 2.00% ROYALTY STAT EXCLUSIVE LICENSE UNDER TECHNOLOGY, TRADEMARK AND COPYRIGHT TO MANUFACTURE AND MARKET ELECTRIC VEHICLES. M.C.D. LTD. MARCH MOTORS LTD. UNITED KINGDOM UNITED KINGDOM 12/15/ 1995 2.50% ROYALTY STAT EXCLUSIVE TECHNOLOGY, COPYRIGHTS, PATENT AND TRADEMARK LICENSE TO MANUFACTURE, MARKET AND SELL MOTOR VEHICLE ENGINES, SPECIFICALLY A 750 CC, 4 CYLINDER, TWIN- CAM ENGINE, DRIVETRAIN AND GEAR BOX FOR USE WITH THE SUPERBIKE MOTORCYCLE. EDMOND B. CICOTTE, INDIVIDUAL WILLIAMS CONTROLS, INC. MICHIGAN MICHIGAN 11/1/ 1998 3.00% ROYALTY STAT EXCLUSIVE PATENT, TECHNOLOGY AND KNOW- HOW LICENSE TO MAKE, USE AND SELL ADJUSTABLE AUTOMOTIVE BRAKE, CLUTCH, AND ACCELERATOR PEDALS AND PARTS, BUT EXCLUDING SUPPLEMENTAL COMPONENTS SUCH AS WIRING HARNESS, ELECTRONIC SENSORS AND ELECTRICAL CONTROLS, WITH RIGHT TO SUBLICENSE. I.T.A. NO.544/DEL/2015 7 NORMAN C. FAWLEY; NCF INDUSTRIES, INC. NATURAL GAS VEHICLE SYSTEMS, INC. NEW YORK CALIFORNIA 2/9/ 1990 3.00% ROYALTY STAT AMENDMENT TO EXCLUSIVE PATENT, TECHNOLOGY AND KNOW-HOW LICENSE TO MANUFACTURE, USE, EXPLOIT, SELL AND SUBLICENSE COMPOSITE REINFORCED METALLIC CYLINDERS AND TUBES, AND NON-METALLIC REHABILITATION SYSTEMS PRODUCED TO PREVENT PROPAGATING DUCTILE FRACTURES OR TO INCREASE THE BURST PRESSURE. ENVIRONMEN- -TAL RECYCLING TECHNOLOGIES PLC GLOBAL TECH INTERNATIONAL, INC. LONDON FARMINGTON HILLS 6/23/ 2008 3.00% ROYALTY STAT EXCLUSIVE PATENT AND KNOWHOW LICENSE TO MAKE, USE, SUBLICENSE, AND SELL AUTOMOTIVE PRODUCTS OR COMPONENTS WHICH DO NOT FEATURE AS PART OF ITS MANUFACTURE THE ESSENTIAL ENCAPSULATION OF A MAGNESIUM PART. TURBODYNE TECHNOLOGI ES, INC. AND TURBODYNE SYSTEMS, INC. ALLIED SIGNAL, INC. CALIFORNIA TORRANCE 1/28/ 1999 3.70% ROYALTY STAT EXCLUSIVE PATENT LICENSE TO MAKE, USE AND SELL ELECTRICALLY ASSISTED CHARGE AIR PRODUCTS OR OTHER ENGINE PRODUCTS, INCLUDING ELECTRICALLY ASSISTED TURBOCHARGERS AND TURBOCHARGERS EMPLOYING AN ELECTRIC MOTOR OR GENERATOR FOR POWER ASSIST OR TAKE -OFF. EDMOND B. CICOTTE WILLIAMS CONTROLS INC AND PROACTIVE ACQUISITION CORPORATION 11/1/ 1998 3.00% ROYALTY STAT EXCLUSIVE RIGHT AND LICENSE TO USE THE TECHNICAL INFORMATION AND KNOW-HOW AND TO APPLY PATENTS OWNED OR DEVELOPED BY LICENSOR ON MATTERS PERTAINING TO THE ENGINEERING, DESIGN, AND MANUFACTURE OF AUTOMOTIVE BRAKE, CLUTCH AND/OR ACCELERATOR I.T.A. NO.544/DEL/2015 8 INCLUDING THOSE DEVELOPED IN CONJUNCTION WITH SAID CONSULTING AGREEMENT. ELECTRONIC CONTROLS TECHNOLOGY LIC HYBRID FUEL SYSTEMS, INC. 3.50% ROYALTY STAT EXCLUSIVE RIGHT TO USE, MANUFACTURE, LEASE AND/ OR SELL PRODUCTS AND/OR SYSTEMS EMBODYING FIVE U.S. PATENTS AND RELATED TECHNICAL KNOWHOW TO COMMERCIALIZE THE TECHNOLOGY EMBODIED IN FIVE ISSUED AND ONE PENDING US PATENT IN THE FIELD OF FUEL CONVERSION SYSTEMS. ELECTRO- SOURCE INC. SMH A UTOMOBILE S.A.I 3/14/ 1997 3% - 5% ROY ALTY STAT WORLDWIDE LICENSE, UNLIMITED IN TIME AND WITH AUTHORITY TO ISSUE SUB-LICENSE, RESTRICTED TO THE USE OF THE BACKGROUND KNOW- HOW FOR MICRO PASSENGER CARS WITH HYBRID POWER AND FOUR WHEELS. NISSAN MOTOR CO LTD -SP ADR SAMSUNG GROUP 1.6% - 1.9% ROYALTY STAT LICENSING OF MANUFACTURING TECHNOLOGY TO BUILD AN AUTO MANUFACTURING BUSINESS FROM SCRATCH TO SOUTH KOREAN CONGLOMERATE; INCLUDES STATE- OF-THE- SUMITOMO (SEI) BRAKE SYSTEMS INC SAPURA MOTORS BHD 3 .0% ROYALTY STAT TECHNICAL ASSISTANCE AGREEMENT TO PRODUCE BRAKE CALIPER ASSEMBLY. AVERAGE 3.0% 7. THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WAS FORWARDED TO THE TPO TO SUBMIT HIS REMAND REPORT WHICH HAS BEEN INCORPORATED BY THE LD. CIT (A) FROM PAGES 11 TO 15 OF THE APPELLATE ORDER. IN THE SAID REMAND REPORT, THE TPO SUBMITTED THAT THE CUP I.T.A. NO.544/DEL/2015 9 DATA RELIED UPON BY THE ASSESSEE IS UNRELIABLE AND CI TED THE OECD TRANSFER PRICING GUIDELINES AND THE DECISION OF ITA T MUMBAI BENCH IN THE CASE OF UCB INDIA PVT. LTD. VS. ACIT (200 9) 30 SOT 95, BUT FAILED TO EXAMINE THE EXTERNAL COMPARABLES OR ANY COMMENTS ON MERITS. LD. CIT (A), AFTER CONSIDERING THE ENTIRE MATERIAL FACTS ON RECORD AND THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE TPO, HEL D THAT THE ROYALTY PAID BY THE ASSESSEE TO ITS AE @ 3.15% ON NET SALES MEETS THE ARMS LENGTH REQUIREMENT AND IT IS COMPARABLE TO THE ROYALTY PAID BY UNCONTROLLED THIRD PARTIES. HE FURTHER HELD THAT NO MEANINGFUL CONCLUSION WAS PROVIDED BY THE TPO TO HOL D THAT THE ENTIRE ROYALTY PAYMENT SHOULD BE REDUCED TO NIL. THE E NTIRE REVENUE OF THE ASSESSEE IS FROM PRODUCTS MANUFACTURED BY THE TECHNOLOGY PROVIDED BY ITS AE. THE ASSESSEE HAS BEEN SUPPLYING AUTOMOBILE COMPONENT TO VARIOUS REPUTED AUTOMOBILE MANUFACTURERS SUCH AS HONDA SIEL CARS INDIA LTD. THE RE IS AN AGREEMENT BETWEEN THE ASSESSEE AND THE AE DATED 1.04.20 08 IN CONSIDERATION FOR THE LICENSE AND RIGHTS AVAILED AND N O INDEPENDENT COMPANY WOULD PROVIDE SUCH LICENSE TO USE A TECHNOLOGY INCLUDING KNOWHOW VARY OF CHARGE WITHOUT ANY CHARGE OR ROYALTY. ACCORDINGLY, HE DIRECTED THE TPO/ASSESSI NG OFFICER TO DELETE THE ADDITION OF RS.91,42,654/-. 8. BEFORE US, LEARNED DR STRONGLY RELIED UPON THE ORD ER OF THE ASSESSING OFFICER/TPO. 9. AFTER CONSIDERING THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS, WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE ASS ESSEE IN TERMS OF AGREEMENT DATED 1.04.2008 HAD ENTERED INTO A N AGREEMENT WITH ITS AE FOR GRANTING THE USE OF NON-EXCL USIVE RIGHT I.T.A. NO.544/DEL/2015 10 AND LICENSE TO USE TECHNOLOGY INCLUDING THE KNOWHOW OF THE AE FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF MANUFACTURI NG OF AUTOMOTIVE COMPONENTS IN INDIA. THE ASSESSEE HAS BEEN PAYING ROYALTY RANGING @ 3% TO 5% OF THE SALES. AS NOTED IN THE IMPUGNED ORDER, THE ACTUAL ROYALTY PAID IN THIS YEAR WAS @ 3.15 % OF THE NET SALES. THE ASSESSEE HAS BENCH MARKED THE ALP OF THE R OYALTY PAYMENT BY APPLYING CUP AS MAM, FIRSTLY , BY CONSIDERING THE RATE OF ROYALTY SPECIFIED BY THE CENTRAL GOVERNMENT UNDER TH E FEMA REGULATION; AND SECONDLY , BEFORE THE TPO, ASSESSEE RELIED UPON ONE EXTERNAL COMPARABLE OF HINDUSTAN MOTORS PVT. LTD. WHIC H WAS PAYING ROYALTY @ 5% TO MITSUBISHI CORPORATION LTD. BEF ORE THE LD. CIT (A), THE ASSESSEE HAS GIVEN VARIOUS EXTERNAL COM PARABLES FROM ROYALTY STATS, THE DETAILS OF WHICH HAD ALREADY BEEN I NCORPORATED ABOVE, WHEREIN THE AVERAGE ROYALTY PAID ACROSS THE I NDUSTRY FOR THE LICENSE TO USE TECHNOLOGY AND KNOWHOW IS APPROXIMATE LY 3%. THUS, THE ASSESSEES PAYMENT OF ROYALTY TO ITS AE WAS JUSTIFIED BY USING THE EXTERNAL CUP, THAT IS, BY PLACING CATENA OF COMPARABLE UNCONTROLLED TRANSACTION OF THE THIRD PARTIES. THE LEARNE D TPO WITHOUT ACTUALLY CARRYING OUT ANY ANALYSIS OF THE COMP ARABLES DURING THE REMAND PROCEEDINGS OR ASSIGNING ANY BASIS HAD SIMPLY HELD THAT ROYALTY SHOULD BE TAKEN AT NIL, BECAUSE ASSES SEE HAS INCURRED LOSS AT ENTITY LEVEL AND THAT IS WHY THE TECHN ICAL KNOWLEDGE OR KNOWHOW FROM AE HAS NOT PROVIDED ANY EC ONOMIC BENEFIT TO THE ASSESSEE. SUCH AN OBSERVATION OR REASONI NG CANNOT BE UPHELD AT ALL, BECAUSE ONCE THERE IS A VALID AGREE MENT FOR TRANSFER OF NON-EXCLUSIVE RIGHT FOR USE OF LICENSE TO USE TECHNOLOGY INCLUDING KNOWHOW OF AE FOR THE PURPOSE OF CARRYING OUT MANUFACTURING OF AUTOMOTIVE PARTS FROM WHICH ASSESSE E HAS EARNED SUBSTANTIAL REVENUE RECEIPTS, THEN SUCH A USE O F TECHNOLOGY AND KNOWHOW IS DIRECTLY LINKED WITH MANUFACTURING AND I.T.A. NO.544/DEL/2015 11 RESULTANTLY SALES. INCURRING OF LOSS CANNOT BE THE PAR AMETER TO HOLD THAT THE TECHNOLOGICAL KNOWHOW OR LICENSE WAS OF NO BE NEFIT HENCE THERE WAS NO REQUIREMENT TO PAY THE ROYALTY. LOSS CANN OT BE CO- RELATED WITH THE ECONOMIC BENEFIT OF USE OF TECHNOLOGY OR KNOWHOW BECAUSE PROFIT AND LOSS ARE MARKET DRIVEN AND HOST OF OTHER ECONOMIC FACTORS. THE TPO WAS ONLY REQUIRED TO SEE, WHETHER THE PAYMENT OF ROYALTY MEETS THE ARMS LENGTH REQUIREMENT O F ALP OR NOT. EVEN WHEN THE CHANCE WAS GIVEN TO THE TPO IN THE REMAND PROCEEDINGS BY THE LD. CIT (A), HE HAS FAILED TO EXAM INE THE EXTERNAL CUP. WE FIND THAT LD. CIT (A) HAS ANALYZED ALL THE FACTORS AND VARIOUS COMPARABLE UNCONTROLLED TRANSACTIONS TO RE ACH TO A CONCLUSION THAT ROYALTY PAYMENT @ 3.15% IS AT ALP, AN D ACCORDINGLY, WE DO NOT FIND ANY REASON TO DEVIATE FR OM SUCH A FINDING AND THE SAME IS UPHELD. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2018. SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH FEBRUARY, 2018 PKK: