M/S. HYUNDAI MOTOR INDIA LTD.,KANCHEEPURAM V. .ACIT, LTU-2, , CHENNAI

ITTPA 24/CHNY/2020

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The case involves Hyundai Motor India Ltd., which appealed against the transfer pricing adjustments made by the Assessing Officer and upheld by the Dispute Resolution Panel. The adjustments were related to royalty payments made to its holding company, which were found to be above the arm's length range compared to four comparable companies. The Tribunal examined whether the adjustments were justified and whether the TPO had exceeded her jurisdiction in re-computing the royalty rate and questioning the industry average used by the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107430 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2020
• Other Referred Cases: Hyundai Motor India Ltd. vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: S.P.CHIDAMBARAM
• Keywords: Set aside; Transfer pricing; International transaction; Principle of natural justice; Competent authority
• Section: 153; 13; 153(2A); 20

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’\u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI \u0001ीएबीटी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ीअिमताभशु\u0018ा, लेखासद\tक ेसम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER IT (TP) A No.24/Chny/2020 िनधा\u000eरणवष\u000e/Assessment Year: 2008-09 M/s. Hyundai Motor India Ltd., Plot No.H-1, SIPCOT Industrial Park, Irungatukottai, Sriperumbudur Taluk, Kancheepuram District, Tamil Nadu-602 117. v. The ACIT, Large Taxpayer Unit-2, Nungambakkam, Chennai – 600 034. [PAN: AAACH 2364 M] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr. S.P.Chidambaram, Advocate \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mr.A. Sasikumar, CIT सुनवाईक\u001aतारीख/Date of Hearing : 26.09.2024 घोषणाक\u001aतारीख /Date of Pronouncement : 09.12.2024 आदेश / O R D E R PER ABY T. VARKEY, JM: This appeal has been preferred by the assessee pursuant to the directions issued by the Hon’ble Madras High Court order passed for AY 2008-09 in WA No. 2014 of 2018 dated 16.09.2020. 2. Brief facts of the case are that, the assessee is engaged in the business of manufacturing, selling and servicing passenger vehicles and related spare parts/CKD parts in the domestic as well as overseas markets. The assessee has obtained exclusive license from its holding company, M/s.Hyundai Motors India Ltd Both the brand name & logo belong to the holding company, which is being used by the assessee. In the relevant AY 2008 Pricing Officer [TPO] noted that, the royalty paid by the assessee to the holding company was 3.47%, which washi rates of four comparable companies, which worked out to 2.54% and therefore held that, the international transaction involving payment of royalty was not at arm’s length. The TPO accordingly made a transfer pricing adjustment of assessment order passed by the incorporating the aforesaid transfer pricing adjustment, the assessee had filed objections before the Dispute Resolution Panel noted to have in principle upheld the transfer pricing adjustment to royalty payment but corrected some calculation errors and accordingly revised the transfer pricing adjustment from crores. Aggrieved by the order of the Ld. appeal before this Tribunal who No.2353/Mds/2012 dated 22.04.2016 had upheld the transfer pricing adjustment. Subsequently, the assessee preferred Petition[MA No.93/Mds/2016 had inter alia contended that the royalty paid by it was 3.6% of the sales whereas, the industry average rate for AY 2008 IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 2 :: M/s.Hyundai Motors India Ltd, Korea to produce cars in Both the brand name & logo belong to the holding company, which is being used by the assessee. In the relevant AY 2008-09, the noted that, the royalty paid by the assessee to the holding company was 3.47%, which washigher than the average royalty es of four comparable companies, which worked out to 2.54% and therefore held that, the international transaction involving payment of royalty was not at arm’s length. The TPO accordingly made a transfer of Rs.106.67 crores. Aggrieved by the draft assessment order passed by the Assessing Officer [ incorporating the aforesaid transfer pricing adjustment, the assessee had the Dispute Resolution Panel [DRP]. The Ld. DRP is noted to have in principle upheld the transfer pricing adjustment to royalty payment but corrected some calculation errors and accordingly revised the transfer pricing adjustment from Rs.106.67 crores to Rs.86.88 Aggrieved by the order of the Ld. DRP, the assessee preferred an appeal before this Tribunal whom vide their original order in ITA No.2353/Mds/2012 dated 22.04.2016 had upheld the transfer pricing adjustment. Subsequently, the assessee preferred a Miscellaneous MA No.93/Mds/2016] before this Tribunal, wherein contended that the royalty paid by it was 3.6% of the sales the industry average rate for AY 2008-09 was 4.7% and /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. to produce cars in India. Both the brand name & logo belong to the holding company, which is 09, the Transfer noted that, the royalty paid by the assessee to the average royalty es of four comparable companies, which worked out to 2.54% and therefore held that, the international transaction involving payment of royalty was not at arm’s length. The TPO accordingly made a transfer . Aggrieved by the draft Assessing Officer [AO]inter alia incorporating the aforesaid transfer pricing adjustment, the assessee had . The Ld. DRP is noted to have in principle upheld the transfer pricing adjustment to royalty payment but corrected some calculation errors and accordingly Rs.106.67 crores to Rs.86.88 DRP, the assessee preferred an vide their original order in ITA No.2353/Mds/2012 dated 22.04.2016 had upheld the transfer pricing a Miscellaneous wherein the assessee contended that the royalty paid by it was 3.6% of the sales, 09 was 4.7% and therefore following the benchmarking methodology upheld in AY 2007 i.e. royalty rate paid was lesser than industry average, that the transfer pricing adjustment be deleted. This Tribunal is noted to have disposed of the Miscellaneous Application vide its order dated 06.09.2016 with the following “6. It is submitted by the learned Authorized Representative that for the relevant assessment year also the average rate of royalty in the industry is 4.7% which is higher than the appellant’s average rate of royalty payment of 3.6%. Therefore there is a the Tribunal which is required to be rectified. 7. On this issue, already decided that the average rate of royalty payment in the industry has to be considered in the arm’s length price and if the same is more than the rate of royalty payment made by the assessee, then no adjustment is required. the Ld.A.R has pointed out that in the case of the assessee the rate of Royalty industry we hereby direct the learned TPO to verify the same and decide the matter in the light of our above decision 3. Pursuant to the above specific directions of the Tribunal, the TPO is noted to have re-examined the case records and observed that the aggregate royalty payment of Rs.364.10 crores was made against the net sales of Rs.7275.94 crores and therefore the royal 5% as opposed to 3.6% computed by the assessee. The TPO further observed that the industry average of 4.7% claimed by the assessee had no basis and questioned the source and year of this data. He additionally observed that the royalty IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 3 :: therefore following the benchmarking methodology upheld in AY 2007 royalty rate paid was lesser than industry average, and so, that the transfer pricing adjustment be deleted. This Tribunal is noted to have disposed of the Miscellaneous Application vide its order dated 06.09.2016 with the following directions: - “6. It is submitted by the learned Authorized Representative that for the relevant assessment year also the average rate of royalty in the industry is 4.7% which is higher than the appellant’s average rate of royalty payment of 3.6%. Therefore there is a apparent mistake in the order of the Tribunal which is required to be rectified. 7. On this issue, following our decision for the preceding year already decided that the average rate of royalty payment in the industry has to be considered in the case of the assessee for determining the arm’s length price and if the same is more than the rate of royalty payment made by the assessee, then no adjustment is required. the Ld.A.R has pointed out that in the case of the assessee the rate of Royalty payment is less than the rate prevalent in the industry we hereby direct the learned TPO to verify the same and decide the matter in the light of our above decision.” (emphasis supplied) Pursuant to the above specific directions of the Tribunal, the TPO is examined the case records and observed that the aggregate royalty payment of Rs.364.10 crores was made against the net sales of Rs.7275.94 crores and therefore the royalty rate worked out to 5% as opposed to 3.6% computed by the assessee. The TPO further observed that the industry average of 4.7% claimed by the assessee had no basis and questioned the source and year of this data. He additionally observed that the royalty of 5% paid to its holding company was higher /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. therefore following the benchmarking methodology upheld in AY 2007-08 and so, contended that the transfer pricing adjustment be deleted. This Tribunal is noted to have disposed of the Miscellaneous Application vide its order dated “6. It is submitted by the learned Authorized Representative that for the relevant assessment year also the average rate of royalty in the industry is 4.7% which is higher than the appellant’s average rate of royalty apparent mistake in the order of following our decision for the preceding year, we have already decided that the average rate of royalty payment in the industry case of the assessee for determining the arm’s length price and if the same is more than the rate of royalty payment made by the assessee, then no adjustment is required. Since the Ld.A.R has pointed out that in the case of the assessee the payment is less than the rate prevalent in the industry we hereby direct the learned TPO to verify the same and (emphasis supplied) Pursuant to the above specific directions of the Tribunal, the TPO is examined the case records and observed that the aggregate royalty payment of Rs.364.10 crores was made against the net ty rate worked out to 5% as opposed to 3.6% computed by the assessee. The TPO further observed that the industry average of 4.7% claimed by the assessee had no basis and questioned the source and year of this data. He additionally of 5% paid to its holding company was higher than the so-called industry average claimed by the assessee. The TPO thus held that, the assessee was unable to show that the royalty paid to its AE was at arm’s length and therefore retained the transfer prici adjustment of Rs.86.88 crores. 4. Being aggrieved by this order of the TPO, the assessee is noted to have approached the Hon’ble Madras High Court in WP No. 22508 of 2017 inter alia contending that the action of the TPO was in excess of the directions given by this Tribunal and that the TPO could not sit in judgment over the directions of this Tribunal. It is noted that, the Hon’ble High Court vide their order dated 16.07.2018 had dismissed the writ petition preferred by the assessee observing that the alternate remedy available and therefore could not approach the Hon’ble High Court. The Hon’ble High Court further observed that, there was no violation on the part of the issued by this Tribunal. taken note of by us is as follows: “10. It is urged before this Court that the ITAT matter in respect of the factual details and the particulars involved in the case of the writ petitione back for re-adjudication. undertaken by the competent authority/respondents, they are duty bound to verify all the records once again and decide the matter on merits and in order of remand from the ITAT, the respondents had undertaken the process of scrutiny and the writ petitioner also had participated in three personal hearings. The documents IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 4 :: called industry average claimed by the assessee. The TPO thus held that, the assessee was unable to show that the royalty paid to its AE was at arm’s length and therefore retained the transfer prici adjustment of Rs.86.88 crores. Being aggrieved by this order of the TPO, the assessee is noted to have approached the Hon’ble Madras High Court in WP No. 22508 of 2017 contending that the action of the TPO was in excess of the given by this Tribunal and that the TPO could not sit in judgment over the directions of this Tribunal. It is noted that, the Hon’ble High Court vide their order dated 16.07.2018 had dismissed the writ petition preferred by the assessee observing that the alternate remedy available and therefore could not approach the Hon’ble High Court. The Hon’ble High Court further observed that, there was no violation on the part of the TPO in respect of implementing the issued by this Tribunal. The relevant findings of the Hon’ble High Court taken note of by us is as follows:- s urged before this Court that the ITAT has not decided the matter in respect of the factual details and the particulars involved in e writ petitioner. Contrarily, the ITAT remanded the matter adjudication. When the process of re-adjudication is undertaken by the competent authority/respondents, they are duty bound to verify all the records once again and decide the matter on merits and in accordance with law. On receipt of the order of remand from the ITAT, the respondents had undertaken the process of scrutiny and the writ petitioner also had participated in three personal hearings. The documents /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. called industry average claimed by the assessee. The TPO thus held that, the assessee was unable to show that the royalty paid to its AE was at arm’s length and therefore retained the transfer pricing Being aggrieved by this order of the TPO, the assessee is noted to have approached the Hon’ble Madras High Court in WP No. 22508 of 2017 contending that the action of the TPO was in excess of the given by this Tribunal and that the TPO could not sit in judgment over the directions of this Tribunal. It is noted that, the Hon’ble High Court vide their order dated 16.07.2018 had dismissed the writ petition preferred by the assessee observing that the assessee had alternate remedy available and therefore could not approach the Hon’ble High Court. The Hon’ble High Court further observed that, there was no in respect of implementing the directions The relevant findings of the Hon’ble High Court has not decided the matter in respect of the factual details and the particulars involved in remanded the matter adjudication is undertaken by the competent authority/respondents, they are duty bound to verify all the records once again and decide the accordance with law. On receipt of the order of remand from the ITAT, the respondents had undertaken the process of scrutiny and the writ petitioner also had participated in three personal hearings. The documents submitted by the writ petitioner was scruti in all respects. The objections from the representative of the writ petitioner Company also had been considered. By providing all opportunities to re Officer(TPO) found that there were certain d matter of royalty payment. Thus, there was no violation on the part of the respondents in respect of implementing the orders passed by the ITAT, remanding the matter for re 23. Considering the above judgments of the Apex Court is of an opinion that the writ petitioner has not established that there is a violation of principles of natural justice nor there is an error apparent on record. No exceptional circumstances have been established in the present writ peti respect of the fixing of average rate of royalty payment, then it is left open to them to approach the Disputes Resolution Panel and thereafter, if they are further aggrieved in respect of the fixing of royalty payment, then th for the purpose of adjudicating the issues remedy available under the statute for the writ petitioner, there is no reason to entertain a wri Constitution of India, so as to adjudicate the merits and the demerits now raised before this Court in the present writ petition in respect of fixing of average rate of royalty payment. 24. Under these circumstances, th undoubted opinion that the writ petitioner has not made out any case for the purpose of waiving the efficacious alternate remedy available to the writ petitioner under the provisions of the Act and therefore, this Court is not inclined to merits and adjudicate the issues involved in respect of fixing of average rate of royalty payment. 25. Accordingly, the writ petition stands dismissed. 5. Being aggrieved by the above order of the Sing Madras High Court, the assessee is noted to have filed an appeal against the same before the Division Bench of the Hon’ble High Court in WA No. IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 5 :: submitted by the writ petitioner was scrutinised and considered in all respects. The objections from the representative of the writ petitioner Company also had been considered. By providing all opportunities to re-present their case, the Transfer Pricing Officer(TPO) found that there were certain discrepancies in the matter of royalty payment. Thus, there was no violation on the part of the respondents in respect of implementing the orders passed by the ITAT, remanding the matter for re-consideration. Considering the above judgments of the Apex Court is of an opinion that the writ petitioner has not established that there is a violation of principles of natural justice nor there is an error apparent on record. No exceptional circumstances have been established in the present writ petition. If at all, the writ petitioner is aggrieved in respect of the fixing of average rate of royalty payment, then it is left open to them to approach the Disputes Resolution Panel and thereafter, if they are further aggrieved in respect of the fixing of average rate of royalty payment, then they are liberty to approach the ITAT for the purpose of adjudicating the issues. This being the efficacious remedy available under the statute for the writ petitioner, there is no reason to entertain a writ petition under Article 226 of the Constitution of India, so as to adjudicate the merits and the demerits now raised before this Court in the present writ petition in respect of fixing of average rate of royalty payment. Under these circumstances, this Court is of an undoubted opinion that the writ petitioner has not made out any case for the purpose of waiving the efficacious alternate remedy available to the writ petitioner under the provisions of the Act and therefore, this Court is not inclined to entertain the writ petition on merits and adjudicate the issues involved in respect of fixing of average rate of royalty payment. Accordingly, the writ petition stands dismissed..” (emphasis supplied) Being aggrieved by the above order of the Single Judge of Hon’ble Madras High Court, the assessee is noted to have filed an appeal against the same before the Division Bench of the Hon’ble High Court in WA No. /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. nised and considered in all respects. The objections from the representative of the writ petitioner Company also had been considered. By providing all present their case, the Transfer Pricing iscrepancies in the matter of royalty payment. Thus, there was no violation on the part of the respondents in respect of implementing the orders consideration. Considering the above judgments of the Apex Court, this Court is of an opinion that the writ petitioner has not established that there is a violation of principles of natural justice nor there is an error apparent on record. No exceptional circumstances have been established tion. If at all, the writ petitioner is aggrieved in respect of the fixing of average rate of royalty payment, then it is left open to them to approach the Disputes Resolution Panel and thereafter, average rate of ey are liberty to approach the ITAT constituted . This being the efficacious remedy available under the statute for the writ petitioner, there t petition under Article 226 of the Constitution of India, so as to adjudicate the merits and the demerits now raised before this Court in the present writ petition in respect of fixing of average rate of royalty payment. is Court is of an undoubted opinion that the writ petitioner has not made out any case for the purpose of waiving the efficacious alternate remedy available to the writ petitioner under the provisions of the Act entertain the writ petition on merits and adjudicate the issues involved in respect of fixing of average (emphasis supplied) le Judge of Hon’ble Madras High Court, the assessee is noted to have filed an appeal against the same before the Division Bench of the Hon’ble High Court in WA No. 2014 of 2018, wherein concurred with the findings of the Single Judge that, where alternative remedy is available to the aggrieved person under Statutewherein the action complained of contains a mechanism for redressal of grievance still holds the field entertained ignoring the statutory dispensation Bench however gave the liberty to the assessee to approach this Tribunal against the order of the TPO. The relevant findings of the Hon’ble Division Bench taken note of by us is as “11. Therefore, this writ appeal is disposed of with the above observations with liberty to the assessee / appellant to approach the Tribunal within four weeks from the date of receipt of a copy of this order. We leave all the issues open to be 6. Pursuant to the above directions of the Hon’ble jurisdictional Madras High Court, the assessee has preferred this appeal before us. 7. Assailing the action of the Ld. TPO, the Ld. AR for assessee has principally urged that the Ld. TPO had exceeded her jurisdiction by not following the specific directions issued by this Tribunal in its MA order dated 06.09.2016. The Ld. AR submitted that t re-examining and re-computing the royalty rate paid by the assessee, as according to him, the Tribunal had recorded a factual finding that, the royalty paid by the assessee was 3.6% and therefore the said finding of fact could not be tinkered with by the TPO. The Ld. AR contended that, IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 6 :: their Lordship’s vide order dated 16.09.2020 has ndings of the Single Judge that, where alternative remedy is available to the aggrieved person under the action complained of contains a mechanism for redressal of grievance still holds the field, then a writ petition entertained ignoring the statutory dispensation. The Hon’ble Division Bench however gave the liberty to the assessee to approach this Tribunal against the order of the TPO. The relevant findings of the Hon’ble Division Bench taken note of by us is as follows: - 11. Therefore, this writ appeal is disposed of with the above observations with liberty to the assessee / appellant to approach the Tribunal within four weeks from the date of receipt of a copy of this order. We leave all the issues open to be agitated before the Tribunal. Pursuant to the above directions of the Hon’ble jurisdictional Madras High Court, the assessee has preferred this appeal before us. Assailing the action of the Ld. TPO, the Ld. AR for assessee has principally urged that the Ld. TPO had exceeded her jurisdiction by not following the specific directions issued by this Tribunal in its MA order dated 06.09.2016. The Ld. AR submitted that the TPO was unjustified in computing the royalty rate paid by the assessee, as according to him, the Tribunal had recorded a factual finding that, the royalty paid by the assessee was 3.6% and therefore the said finding of be tinkered with by the TPO. The Ld. AR contended that, /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. order dated 16.09.2020 has ndings of the Single Judge that, where an effective alternative remedy is available to the aggrieved person under the the action complained of contains a mechanism for a writ petition may not be . The Hon’ble Division Bench however gave the liberty to the assessee to approach this Tribunal against the order of the TPO. The relevant findings of the Hon’ble Division 11. Therefore, this writ appeal is disposed of with the above observations with liberty to the assessee / appellant to approach the Tribunal within four weeks from the date of receipt of a copy of this agitated before the Tribunal.” Pursuant to the above directions of the Hon’ble jurisdictional Madras High Court, the assessee has preferred this appeal before us. Assailing the action of the Ld. TPO, the Ld. AR for assessee has principally urged that the Ld. TPO had exceeded her jurisdiction by not following the specific directions issued by this Tribunal in its MA order he TPO was unjustified in computing the royalty rate paid by the assessee, as according to him, the Tribunal had recorded a factual finding that, the royalty paid by the assessee was 3.6% and therefore the said finding of be tinkered with by the TPO. The Ld. AR contended that, the limited issue before the TPO was to verify whether the same was lower or excess than the The Ld. AR alternatively argued that when the royalty rate in AY 2007-08 was held to be lower than and accordingly treated it at arm’s length, then the same should be followed in this AY as well. The third argument of the Ld. AR was that, the entity level PLI of the ass companies selected in the according to him, had been since the margin of the royalty payment in its cost base and the same is accepted to be at arm's length, no further adjustment on account of excess royalty was warranted. The Ld. AR had filed written submissions in support of these arguments, which is reproduced “4.11 Against the order dated 27.03.2017 and carried out the following: • The TPO recomputed the royalty rate of the Appellant for a royalty payment of INR 364.10 crores as against the net sales of Rs. 7275.94 crores as 5% and compared the same with the industry rate of 4.7% to conclude that the royalty rate paid by the Appellan industry average rate. • The TPO questioned the source and the year of the average industry royalty rate provided by the Appellant from the public domain despite the fact that Appellant provided the retrieval date of the average industry royalty rate which provides the industry average royalty rate of 4.7% and held the Appellant was not entitled to any relief. 4.12 It is evident that the TPO has exceeded her jurisdiction, instead of verifying the industry average royalty rate and avera of royalty paid by the Appellant, the TPO had performed an in IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 7 :: the limited issue before the TPO was to verify whether the same was lower or excess than the industry average royalty rate and nothing more. The Ld. AR alternatively argued that when the royalty rate 08 was held to be lower than industry average r and accordingly treated it at arm’s length, then the same should be followed in this AY as well. The third argument of the Ld. AR was that, the entity level PLI of the assessee was 7.91% and that of the companies selected in the assessee’s TP study was had been accepted by the TPO. He thus urged that, ince the margin of the assessee had been computed after considering nt in its cost base and the same is accepted to be at arm's no further adjustment on account of excess royalty was warranted. The Ld. AR had filed written submissions in support of these arguments, which is reproduced hereunder: - Against the above MP order, the TPO had passed giving effect order dated 27.03.2017 and carried out the following: The TPO recomputed the royalty rate of the Appellant for a royalty payment of INR 364.10 crores as against the net sales of Rs. 7275.94 crores as 5% and compared the same with the industry rate of 4.7% to conclude that the royalty rate paid by the Appellant is higher than the industry average rate. The TPO questioned the source and the year of the average industry royalty rate provided by the Appellant from the public domain despite the fact that Appellant provided the retrieval date of the average ry royalty rate which provides the industry average royalty rate of 4.7% and held the Appellant was not entitled to any relief. It is evident that the TPO has exceeded her jurisdiction, instead of verifying the industry average royalty rate and avera of royalty paid by the Appellant, the TPO had performed an in /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. the limited issue before the TPO was to verify whether the same was and nothing more. The Ld. AR alternatively argued that when the royalty rate of 4.22% paid industry average rate of 4.7% and accordingly treated it at arm’s length, then the same should be followed in this AY as well. The third argument of the Ld. AR was that, the essee was 7.91% and that of the comparable 6.98%, which . He thus urged that, after considering nt in its cost base and the same is accepted to be at arm's no further adjustment on account of excess royalty was warranted. The Ld. AR had filed written submissions in support of these above MP order, the TPO had passed giving effect The TPO recomputed the royalty rate of the Appellant for a royalty payment of INR 364.10 crores as against the net sales of Rs. 7275.94 crores as 5% and compared the same with the industry rate of 4.7% to t is higher than the The TPO questioned the source and the year of the average industry royalty rate provided by the Appellant from the public domain despite the fact that Appellant provided the retrieval date of the average ry royalty rate which provides the industry average royalty rate of It is evident that the TPO has exceeded her jurisdiction, instead of verifying the industry average royalty rate and average rate of royalty paid by the Appellant, the TPO had performed an in-depth analysis of the industry average royalty data and impliedly concluded that the Wikipedia data is not reliable. Further TPO also re average rate of royalty paid by the Ap wrong denominator of net sales. 4.13 In fact the TPO has gone to the extent of making unwanted comment on the ITAT decision of AY 2007 the giving effect order dated 27.03.2017 is reproduced below “From the above it is evident that the Hon’ble ITAT was under the erroneous impression that the rate of 4.7% was categorically found out by the TPO in her order for AY 2007 industry and still she proceeded with a comparabil made the adjustment which was not, in the opinion of Hon’ble ITAT, required…..” 4.14 Aggrieved by the order of TPO, the Appellant filed a Writ Petition (WP No 22508 of 2017). The writ petition was admitted on 24.08.2017 on the ground order passed by the ITAT and the observations made in the giving effect order passed by the TPO was not tenable. The relevant extracts of the writ interim order are reproduced below: “After hearing the learned c length of time, this court is of the prima facie view that the order of remand by the ITAT was specific in judgement over an order passed by the ITAT made in the impugned order the said effect is not tenable. Furthermore, when the first respondent does not dispute the data, cannot refuse to accept the same culled out from Wikipedia. What is important to note is the effect of the report which are listed in Sl. Nos. 67, 68 and 69 in the Wikipedia website and therefore, the observation to the said effect prima facie is not tenable. recorded the very same source for determining Thus, this court is inclined to entertain the writ petition.” 4.15 In the above context, there are various decisions which mandates strict implementation of specific direction by Tribunal. The Delhi High Court in its decision in Commissioner of Income Tax [2017] 79 taxmann.com 451 (Delhi) that the TPO could not undertake new adjudication beyond the scope of a remand.The relevant extract of the order is reproduced below: “13. In this view of the matter, the court is of opinion that the impugned show cause notice cannot be sustained. Firstly, when there is a remand on the basis of a specific finding (in this case, the untenability of shifting of the OP/TC to FOB) the TPO co travelled beyond it, given that there was no controversy ever about the inclusion of any comparable. Concededly there was no controversy about the appropriateness of inclusion of any comparable for the ALP determination purpose. Nor was there direction on that score. In the given circumstances, the Revenue IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 8 :: analysis of the industry average royalty data and impliedly concluded that the Wikipedia data is not reliable. Further TPO also re average rate of royalty paid by the Appellant as 5% by reckoning a wrong denominator of net sales. In fact the TPO has gone to the extent of making unwanted comment on the ITAT decision of AY 2007-08. The relevant extract from the giving effect order dated 27.03.2017 is reproduced below “From the above it is evident that the Hon’ble ITAT was under the erroneous impression that the rate of 4.7% was categorically found out by the TPO in her order for AY 2007-08 as the average rate in the industry and still she proceeded with a comparability study, etc. and made the adjustment which was not, in the opinion of Hon’ble ITAT, Aggrieved by the order of TPO, the Appellant filed a Writ Petition (WP No 22508 of 2017). The writ petition was admitted on 24.08.2017 on the ground that the TPO cannot sit in judgement over an order passed by the ITAT and the observations made in the giving effect order passed by the TPO was not tenable. The relevant extracts of the writ interim order are reproduced below: “After hearing the learned counsels for the parties for a considerable length of time, this court is of the prima facie view that the order of remand by the ITAT was specific and the first respondent in judgement over an order passed by the ITAT and the observations in the impugned order the said effect is not tenable. when the first respondent does not dispute the data, cannot refuse to accept the same solely because references were culled out from Wikipedia. What is important to note is the effect of he report which are listed in Sl. Nos. 67, 68 and 69 in the Wikipedia website and therefore, the observation to the said effect prima facie is not tenable. That apart, for the earlier assessment year, TPO has recorded the very same source for determining the rate of royalty Thus, this court is inclined to entertain the writ petition.” In the above context, there are various decisions which mandates strict implementation of specific direction by Tribunal. The Delhi High Court in its decision in Li & Fung India Pvt. Ltd. v. Assistant Commissioner of Income Tax [2017] 79 taxmann.com 451 (Delhi) that the TPO could not undertake new adjudication beyond the scope of a remand.The relevant extract of the order is reproduced below: “13. In this view of the matter, the court is of opinion that the impugned show cause notice cannot be sustained. Firstly, when there is a remand on the basis of a specific finding (in this case, the untenability of shifting of the OP/TC to FOB) the TPO co travelled beyond it, given that there was no controversy ever about the inclusion of any comparable. Concededly there was no controversy about the appropriateness of inclusion of any comparable for the ALP determination purpose. Nor was there any finding or direction on that score. In the given circumstances, the Revenue /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. analysis of the industry average royalty data and impliedly concluded that the Wikipedia data is not reliable. Further TPO also re-determined pellant as 5% by reckoning a In fact the TPO has gone to the extent of making unwanted 08. The relevant extract from the giving effect order dated 27.03.2017 is reproduced below: “From the above it is evident that the Hon’ble ITAT was under the erroneous impression that the rate of 4.7% was categorically found 08 as the average rate in the ity study, etc. and made the adjustment which was not, in the opinion of Hon’ble ITAT, Aggrieved by the order of TPO, the Appellant filed a Writ Petition (WP No 22508 of 2017). The writ petition was admitted on that the TPO cannot sit in judgement over an order passed by the ITAT and the observations made in the giving effect order passed by the TPO was not tenable. The relevant extracts of the ounsels for the parties for a considerable length of time, this court is of the prima facie view that the order of and the first respondent cannot sit and the observations in the impugned order the said effect is not tenable. when the first respondent does not dispute the data, solely because references were culled out from Wikipedia. What is important to note is the effect of he report which are listed in Sl. Nos. 67, 68 and 69 in the Wikipedia website and therefore, the observation to the said effect prima facie That apart, for the earlier assessment year, TPO has the rate of royalty. In the above context, there are various decisions which mandates strict implementation of specific direction by Tribunal. The Fung India Pvt. Ltd. v. Assistant Commissioner of Income Tax [2017] 79 taxmann.com 451 (Delhi) held that the TPO could not undertake new adjudication beyond the scope of a remand.The relevant extract of the order is reproduced below: “13. In this view of the matter, the court is of opinion that the impugned show cause notice cannot be sustained. Firstly, when there is a remand on the basis of a specific finding (in this case, the untenability of shifting of the OP/TC to FOB) the TPO could not have travelled beyond it, given that there was no controversy ever about the inclusion of any comparable. Concededly there was no controversy about the appropriateness of inclusion of any comparable any finding or direction on that score. In the given circumstances, the Revenue could not have seized upon the direction to determine it \"afresh\" as the basis for going into the merits of inclusion of such comparables” 4.16 The Bombay High Courtruling in the c Technologies (P.) Ltd. vs. DCIT (2015) 62 taxmann.com 48 the order passed by AO is follow the specific directions given by the Tribunal file. [Para 12 and 17 of “12. The sequence of events narrated above would show that the AO has failed to follow the directions given by the Tribunal in its order dt. 25th Jan., 2012. a specific observation that the DRP and hence, the matter was restored to the file of the AO at the stage of \"Draft assessment order\". Hence, the AO was required to forward a copy of the draft order in terms of s. 144C(1) of the Act and thereafter the procedu the DRP by the assessee might have been followed. Apparently, the AO has failed to follow the mandate of the provisions of s. 144C(1) of the Act. ……Since the AO has failed to comply with the time by s. 153(2A) of the Act and further failed to follow the mandate of the provisions of s. 144C, the impugned order is the one without jurisdiction, null and aside the impugned assessment order.” 4.17 Without prejudice to the above, the Appellant would like to highlight that royalty agreements are generally entered for a long term and hence, the royalty rates would not change year Therefore, since the royalty transaction has been accepted arm’s length for AY 2007 09 as well. Since the average royalty rate of Appellant for AY 2007 i.e. 4.22% was less than the industry average rate of 4.7%, the royalty paid by the Appellant was held to royalty rate for the subject year is 3.60% is less than the industry average rate of 4.7%, the same ought to be followed for AY 2008 also. 4.18 Further, it is pertinent to note that Appellant is 7.91% and that of the comparable companies selected in the Appellant’s TP study is 6.98%, which is accepted by the TPO. Since the margin of the Appellant after considering royalty payment in its cost base is much higher than that of the comparable same is accepted to be at arm's length, disallowance on account of excess Royalty ought not to be made. 4.19 Reliance is placed on Chennai Tribunal’s decision in the case of Siemens Gamesa Renewable Power (P.) Ltd Vs DCIT [2018] 92 taxmann.com 330 subsequent followed in assessee’s own case reported in [2023] 155 IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 9 :: could not have seized upon the direction to determine it \"afresh\" as the basis for going into the merits of inclusion of such comparables” The Bombay High Courtruling in the case of Technologies (P.) Ltd. vs. DCIT (2015) 62 taxmann.com 48 the order passed by AO is void and unenforceable as AO had follow the specific directions given by the Tribunal for restoration of the [Para 12 and 17 of the order] The sequence of events narrated above would show that the AO has failed to follow the directions given by the Tribunal in its order dt. 25th Jan., 2012. We have already noticed that the Tribunal has made a specific observation that the DRP has not passed a reasoned order and hence, the matter was restored to the file of the AO at the stage of \"Draft assessment order\". Hence, the AO was required to forward a copy of the draft order in terms of s. 144C(1) of the Act and thereafter the procedure prescribed for filing objections, if any, before the DRP by the assessee might have been followed. Apparently, the AO has failed to follow the mandate of the provisions of s. 144C(1) of ……Since the AO has failed to comply with the time-limit p by s. 153(2A) of the Act and further failed to follow the mandate of the provisions of s. 144C, the impugned order is the one without jurisdiction, null and void, and unenforceable. Accordingly, we set aside the impugned assessment order.” Without prejudice to the above, the Appellant would like to highlight that royalty agreements are generally entered for a long term and hence, the royalty rates would not change year-on Therefore, since the royalty transaction has been accepted arm’s length for AY 2007-08, the same should be accepted for AY 2008 09 as well. Since the average royalty rate of Appellant for AY 2007 i.e. 4.22% was less than the industry average rate of 4.7%, the royalty paid by the Appellant was held to be at arm’s length. Since the average royalty rate for the subject year is 3.60% is less than the industry average rate of 4.7%, the same ought to be followed for AY 2008 Further, it is pertinent to note that the operating margin of the llant is 7.91% and that of the comparable companies selected in the Appellant’s TP study is 6.98%, which is accepted by the TPO. Since the margin of the Appellant after considering royalty payment in its cost base is much higher than that of the comparable companies and the same is accepted to be at arm's length, disallowance on account of excess Royalty ought not to be made. Reliance is placed on Chennai Tribunal’s decision in the case of Siemens Gamesa Renewable Power (P.) Ltd Vs DCIT [2018] 92 ann.com 330 on adoption of TNMM. This decision has been subsequent followed in assessee’s own case reported in [2023] 155 /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. could not have seized upon the direction to determine it \"afresh\" as the basis for going into the merits of inclusion of such comparables” ase of Lionbridge Technologies (P.) Ltd. vs. DCIT (2015) 62 taxmann.com 48, held that as AO had failed to for restoration of the The sequence of events narrated above would show that the AO has failed to follow the directions given by the Tribunal in its order dt. We have already noticed that the Tribunal has made has not passed a reasoned order and hence, the matter was restored to the file of the AO at the stage of \"Draft assessment order\". Hence, the AO was required to forward a copy of the draft order in terms of s. 144C(1) of the Act and re prescribed for filing objections, if any, before the DRP by the assessee might have been followed. Apparently, the AO has failed to follow the mandate of the provisions of s. 144C(1) of limit prescribed by s. 153(2A) of the Act and further failed to follow the mandate of the provisions of s. 144C, the impugned order is the one without . Accordingly, we set Without prejudice to the above, the Appellant would like to highlight that royalty agreements are generally entered for a long term on-year basis. Therefore, since the royalty transaction has been accepted to be at 08, the same should be accepted for AY 2008- 09 as well. Since the average royalty rate of Appellant for AY 2007-08 i.e. 4.22% was less than the industry average rate of 4.7%, the royalty be at arm’s length. Since the average royalty rate for the subject year is 3.60% is less than the industry average rate of 4.7%, the same ought to be followed for AY 2008-09 the operating margin of the llant is 7.91% and that of the comparable companies selected in the Appellant’s TP study is 6.98%, which is accepted by the TPO. Since the margin of the Appellant after considering royalty payment in its cost companies and the same is accepted to be at arm's length, disallowance on account of Reliance is placed on Chennai Tribunal’s decision in the case of Siemens Gamesa Renewable Power (P.) Ltd Vs DCIT [2018] 92 on adoption of TNMM. This decision has been subsequent followed in assessee’s own case reported in [2023] 155 taxmann.com 406. The relevant extracts of the ruling is reproduced below: “11.2 Further, covered under its ambit the royalty transaction in question. A separate analysis and consequent deletion of royalty payment is unwarranted. Placing reliance in the case of Magneti Marelli Powertrain India (P.) Ltd. (supra) wherein held t …… 11.4 Being so, in our opinion, there is no question of downward adjustment towards royalty payment to AE on the ground that no royalty is allowable on turnover pertained to development of land, substation development and erection and of assessee in both the appeals is allowed.” 4.20 Reliance is also placed on the Delhi High Court’s decision in the case of Magneti Marelli Powertrain India (P.) Ltd. v. Deputy Commissioner of Income adoption of TNMM in the context of technical fee. The relevant extracts are as under [Para 17 of the order]: “17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee, as the most appropriate method in respect of all the international transactions including payment of royalty. The TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of Rs. 38,58,80,000 only for which Comparable Uncontrolled Pri method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element, i.e payment of technical assistance fee, to an entirely di adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction by. Each method is a package in itself, as it were, containing the necessary elements tha judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adop detrimental to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the assessee; the the technical fee payment to 4.21 Reliance is also placed on the Bombay High Court’s decision in the case of Cummins India Ltd. v. Assistant Commissioner of Income tax [2023] 153 taxmann.com 223 royalty. The relevant extracts a IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 10 :: taxmann.com 406. The relevant extracts of the ruling is reproduced “11.2 Further, once the TNMM been applied for the transaction and it covered under its ambit the royalty transaction in question. A separate analysis and consequent deletion of royalty payment is . Placing reliance in the case of Magneti Marelli Powertrain India (P.) Ltd. (supra) wherein held that:— Being so, in our opinion, there is no question of downward adjustment towards royalty payment to AE on the ground that no royalty is allowable on turnover pertained to development of land, substation development and erection and commissioning. This ground of assessee in both the appeals is allowed.” Reliance is also placed on the Delhi High Court’s decision in Magneti Marelli Powertrain India (P.) Ltd. v. Deputy Commissioner of Income-tax [2016] 75 taxmann.com 21 adoption of TNMM in the context of technical fee. The relevant extracts are as under [Para 17 of the order]: “17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee, as the most appropriate method in ect of all the international transactions including payment of TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of Rs. 38,58,80,000 only for which Comparable Uncontrolled Pri method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element, i.e payment of technical assistance fee, to an entirely different (CUP) method. adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction by. Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the assessee; the TNMM had to be applied by the TPO/AO in respect of the technical fee payment too.” (emphasis supplied) Reliance is also placed on the Bombay High Court’s decision in Cummins India Ltd. v. Assistant Commissioner of Income tax [2023] 153 taxmann.com 223 on adoption of TNMM in the context of royalty. The relevant extracts are as under: /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. taxmann.com 406. The relevant extracts of the ruling is reproduced transaction and it covered under its ambit the royalty transaction in question. A separate analysis and consequent deletion of royalty payment is . Placing reliance in the case of Magneti Marelli Being so, in our opinion, there is no question of downward adjustment towards royalty payment to AE on the ground that no royalty is allowable on turnover pertained to development of land, commissioning. This ground Reliance is also placed on the Delhi High Court’s decision in Magneti Marelli Powertrain India (P.) Ltd. v. Deputy tax [2016] 75 taxmann.com 213 (Delhi) on adoption of TNMM in the context of technical fee. The relevant extracts “17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee, as the most appropriate method in ect of all the international transactions including payment of TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of Rs. 38,58,80,000 only for which Comparable Uncontrolled Price (\"CUP\") method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element, i.e payment of fferent (CUP) method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction by. Each method is a package in itself, as it were, t are to be used as filters to judge the soundness of the international transaction in an ALP fixing If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even This would spell chaos and be detrimental to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the TNMM had to be applied by the TPO/AO in respect of Reliance is also placed on the Bombay High Court’s decision in Cummins India Ltd. v. Assistant Commissioner of Income- on adoption of TNMM in the context of “11. Therefore, the TPO having accepted that TNMM method applied by Assessee was the most appropriate method in respect of all the international transactions including payment of royalty cannot dispute application of TNMM method as the most appropriate meth payment of royalty only for which CUP method was sought to be applied. We would concur with Mr. Mistri that having accepted the TNMM method as the most appropriate, it was not open to the TPO to subject only one element, i.e, payment of royalty, different CUP method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction. Each method is a package in itself, as it were, containing the necessary filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both Assessee and the revenue. (emphasis supplied) 4.22 Reliance is also placed on the Bangalore Tribunal decision in the case of Toyota Kirloskar Motors (P.) Ltd. v. Addl. C taxmann.com 107 (Bang. “Ground Nos. 10 TNMM as the most appropriate method and operating margin at entity level after including royalty was compared with comparabl companies. The operating margin of the assessee are at arm's length as concluded by the Ld. TPO. 6. The assessee submits that once the operating margin at segment or entity level is at arm's length, separate analysis of Royalty is not required. This is that the arm's length price shall be computed applying the most appropriate method out of the methods listed in section 92C(I). Rule 10C lays down the guidelines for selection of the most appropriate method. The most appropriate method is to be selected having regard to nature of transaction or class of transaction or class of associated persons, functions performed, assets employed and risks assumed etc. 7. The assessee selected TNMM as the \"most appropr not disputed by the revenue. considers the net profit margin earned by an organization. Adjustments are made to the net profits to factor in the differences at the transaction level or the enterprise level. adjustments are also made for difference in the accounting methodology. TNMM makes a comparison at the IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 11 :: 11. Therefore, the TPO having accepted that TNMM method applied by Assessee was the most appropriate method in respect of all the international transactions including payment of royalty cannot dispute application of TNMM method as the most appropriate meth payment of royalty only for which CUP method was sought to be We would concur with Mr. Mistri that having accepted the TNMM method as the most appropriate, it was not open to the TPO to subject only one element, i.e, payment of royalty, to an entirely different CUP method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction. Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even s can be adopted. This would spell chaos and be detrimental to the interests of both Assessee and the revenue. (emphasis supplied) Reliance is also placed on the Bangalore Tribunal decision in Toyota Kirloskar Motors (P.) Ltd. v. Addl. CIT [2022] 138 taxmann.com 107 (Bang. - Trib.) wherein it is held: Ground Nos. 10-12: 5. The Ld.AR submitted that assessee selected TNMM as the most appropriate method and operating margin at entity level after including royalty was compared with comparabl The operating margin of the assessee are at arm's length as concluded by the Ld. TPO. 6. The assessee submits that once the operating margin at segment or entity level is at arm's length, separate analysis of Royalty is not required. This is for the following reasons: Section 92C(1) provides that the arm's length price shall be computed applying the most appropriate method out of the methods listed in section 92C(I). Rule 10C lays down the guidelines for selection of the most appropriate od. The most appropriate method is to be selected having regard to nature of transaction or class of transaction or class of associated persons, functions performed, assets employed and risks The assessee selected TNMM as the \"most appropriate method\" is not disputed by the revenue. The Ld.AR submitted that the TNMM considers the net profit margin earned by an organization. Adjustments are made to the net profits to factor in the differences at the transaction level or the enterprise level. It is submitted that the adjustments are also made for difference in the accounting methodology. TNMM makes a comparison at the /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. 11. Therefore, the TPO having accepted that TNMM method applied by Assessee was the most appropriate method in respect of all the international transactions including payment of royalty cannot dispute application of TNMM method as the most appropriate method for the payment of royalty only for which CUP method was sought to be We would concur with Mr. Mistri that having accepted the TNMM method as the most appropriate, it was not open to the TPO to to an entirely different CUP method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction. Each method is a package in itself, elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even s can be adopted. This would spell chaos and be detrimental to the interests of both Assessee and the revenue.” Reliance is also placed on the Bangalore Tribunal decision in IT [2022] 138 12: 5. The Ld.AR submitted that assessee selected TNMM as the most appropriate method and operating margin at entity level after including royalty was compared with comparable The operating margin of the assessee are at arm's length 6. The assessee submits that once the operating margin at segment or entity level is at arm's length, separate analysis of Royalty is not for the following reasons: Section 92C(1) provides that the arm's length price shall be computed applying the most appropriate method out of the methods listed in section 92C(I). Rule 10C lays down the guidelines for selection of the most appropriate od. The most appropriate method is to be selected having regard to nature of transaction or class of transaction or class of associated persons, functions performed, assets employed and risks iate method\" is The Ld.AR submitted that the TNMM considers the net profit margin earned by an organization. Adjustments are made to the net profits to factor in the differences at It is submitted that the adjustments are also made for difference in the accounting methodology. TNMM makes a comparison at the entity/global/segment level and not at the transactional level. assailed that the merit of this method is that, it is resili functional differences. As a result of this characteristic, examination is not made at the individual component level of income or expenditure that has been reckoned in arriving at the net profit but at the entity level. The Ld.AR emphasized t macro (global) level, is not possible to identify or pinpoint the contribution of each facet or transaction to the earning of net profit 8. He submitted that in the proc assessee adopted the Net Profit as the starting point, and in arriving at its net profit, the assessee considered and factored the royalty payments. The Ld.AR submitted that, royalty is integral to and inseparable to its dealings in the business segments. that being a relevant aspect of dealings, it would be impractical and also inappropriate to evaluate such payments on an individual a stand-alone basis, de hors the segment to which a benefit from such services accrues.He reiterated that the Ld.TPO in the TP Order held the profits so determined to be satisfying the arm's length test. This aspect has not been disputed. He thus submitte profit margin is demonstrated to be at arm's length, it pre that the various components of income and expenditure, including the international transactions that have been considered in the process of arriving at the Net Profit under such circumstances, it is impermissible to select another method to examine an individual transaction of a segment already considered and evaluated. …… Para 9 to 12….. 13. We note that assessee's margins have been com royalty payment which is higher than the margin of the comparables.It is also not disputed by the revenue that the comparables in case of the comparables, the royalty, margins are computed after including royalty and research and developmen expenses. The view taken by the Coordinate Bench of this Tribunal in assessee's own case for A.Y. 2007 hereinabove wherein all these aspects have been considered. This Tribunal for A.Y. 2007 Ld.TPO in respect of royalty by separately bench marking the transactions. This has been fortified by the clarification given in a Miscellaneous Petition filed by the department which is also reproduced hereinabove. This view is also supported by variou decisions of Coordinate Benches of this Tribunal as well as various High courts, Cojoint reading of these orders, to delete the adjustment proposed for royalty as a separate international transaction. 4.23 Therefore without prejudice to the main contention that the royalty to sales ratio of the Assessee is lesser than the industry average royalty IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 12 :: entity/global/segment level and not at the transactional level. assailed that the merit of this method is that, it is resili functional differences. As a result of this characteristic, examination is not made at the individual component level of income or expenditure that has been reckoned in arriving at the net profit but at the entity The Ld.AR emphasized that when comparison is made at the macro (global) level, where multiple intertwined transactions exist, it is not possible to identify or pinpoint the contribution of each facet or transaction to the earning of net profit. 8. He submitted that in the process of adopting the TNMM, assessee adopted the Net Profit as the starting point, and in arriving at its net profit, the assessee considered and factored the royalty The Ld.AR submitted that, royalty is integral to and inseparable to its dealings in the business segments. It is submitted that being a relevant aspect of dealings, it would be impractical and also inappropriate to evaluate such payments on an individual a alone basis, de hors the segment to which a benefit from such services accrues.He reiterated that the Ld.TPO in the TP Order held the profits so determined to be satisfying the arm's length test. This aspect has not been disputed. He thus submitted that once the net profit margin is demonstrated to be at arm's length, it pre that the various components of income and expenditure, including the international transactions that have been considered in the process of arriving at the Net Profit are also at arm's length, and under such circumstances, it is impermissible to select another method to examine an individual transaction of a segment already considered and evaluated. …… Para 9 to 12….. We note that assessee's margins have been computed including royalty payment which is higher than the margin of the comparables.It is also not disputed by the revenue that the comparables in case of the comparables, the royalty, margins are computed after including royalty and research and developmen The view taken by the Coordinate Bench of this Tribunal in assessee's own case for A.Y. 2007- 08 has been reproduced hereinabove wherein all these aspects have been considered. This Tribunal for A.Y. 2007-08 has deleted the adjustment made by t Ld.TPO in respect of royalty by separately bench marking the transactions. This has been fortified by the clarification given in a Miscellaneous Petition filed by the department which is also reproduced hereinabove. This view is also supported by variou decisions of Coordinate Benches of this Tribunal as well as various High courts, Cojoint reading of these orders, we direct the Ld.AO/TPO to delete the adjustment proposed for royalty as a separate international transaction.” Therefore without prejudice to the main contention that the royalty to sales ratio of the Assessee is lesser than the industry average royalty /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. entity/global/segment level and not at the transactional level. He assailed that the merit of this method is that, it is resilient to minor functional differences. As a result of this characteristic, examination is not made at the individual component level of income or expenditure that has been reckoned in arriving at the net profit but at the entity hat when comparison is made at the where multiple intertwined transactions exist, it is not possible to identify or pinpoint the contribution of each facet or ess of adopting the TNMM, the assessee adopted the Net Profit as the starting point, and in arriving at its net profit, the assessee considered and factored the royalty The Ld.AR submitted that, royalty is integral to and It is submitted that being a relevant aspect of dealings, it would be impractical and also inappropriate to evaluate such payments on an individual and alone basis, de hors the segment to which a benefit from such services accrues.He reiterated that the Ld.TPO in the TP Order held the profits so determined to be satisfying the arm's length test. This d that once the net profit margin is demonstrated to be at arm's length, it pre-supposes that the various components of income and expenditure, including the international transactions that have been considered in the are also at arm's length, and under such circumstances, it is impermissible to select another method to examine an individual transaction of a segment already puted including royalty payment which is higher than the margin of the comparables.It is also not disputed by the revenue that the comparables in case of the comparables, the royalty, margins are computed after including royalty and research and development The view taken by the Coordinate Bench of this Tribunal in 08 has been reproduced hereinabove wherein all these aspects have been considered. This 08 has deleted the adjustment made by the Ld.TPO in respect of royalty by separately bench marking the transactions. This has been fortified by the clarification given in a Miscellaneous Petition filed by the department which is also reproduced hereinabove. This view is also supported by various decisions of Coordinate Benches of this Tribunal as well as various we direct the Ld.AO/TPO to delete the adjustment proposed for royalty as a separate Therefore without prejudice to the main contention that the royalty to sales ratio of the Assessee is lesser than the industry average royalty rate, it is submitted that since royalty transaction is inextricably linked to manufacturing activity it has been international transactions and then benchmarked under TNMM, which method has been accepted by the TPO and therefore separate analysis of royalty under CUP method is unsustainable.” 8. Per contra, the Ld. CIT DR appearing for the Revenue supported the order of the TPO. He pointed out that, the TPO had carried out the directions of the Tribunal and that there was no violation of the same, as upheld by the Hon’ble Madras High Court (supra) as well. He further submitted that the findings rendered in AY 2007 had no bearing in the relevant year due to change in facts and circumstances of the case. The Ld. DR pointed out that, the royalty paid in AY 2007-08 was 4.22% that the industry average rate prevailing in AY 2007 adopted for AY 2008-09 due to timing differences. The Ld. CIT, DR further submitted that, the assessee could not now raise new grounds before thi Tribunal that the royalty be benchmarked at the entity level PLI. According to him, the limited issue now required to be adjudicated is whether the royalty rate paid by the assessee was commensurate with the industry average rate for the year or not. He assessee was unable to factually dislodge the TPO’s findings that the royalty of 5% paid was not lower than industry average and hence urged that the transfer pricing adjustment be retained. IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 13 :: rate, it is submitted that since royalty transaction is inextricably linked to manufacturing activity it has been rightly aggregated with all other international transactions and then benchmarked under TNMM, which method has been accepted by the TPO and therefore separate analysis of royalty under CUP method is unsustainable.” Per contra, the Ld. CIT DR appearing for the Revenue supported the order of the TPO. He pointed out that, the TPO had carried out the directions of the Tribunal and that there was no violation of the same, as upheld by the Hon’ble Madras High Court (supra) in the writ proceedings as well. He further submitted that the findings rendered in AY 2007 had no bearing in the relevant year due to change in facts and circumstances of the case. The Ld. DR pointed out that, the royalty paid 08 was 4.22% as opposed to 5% paid during the year and that the industry average rate prevailing in AY 2007-08 could not be 09 due to timing differences. The Ld. CIT, DR further submitted that, the assessee could not now raise new grounds before thi Tribunal that the royalty be benchmarked at the entity level PLI. According to him, the limited issue now required to be adjudicated is whether the royalty rate paid by the assessee was commensurate with the industry average rate for the year or not. He contended that, the assessee was unable to factually dislodge the TPO’s findings that the royalty of 5% paid was not lower than industry average and hence urged that the transfer pricing adjustment be retained. /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. rate, it is submitted that since royalty transaction is inextricably linked rightly aggregated with all other international transactions and then benchmarked under TNMM, which method has been accepted by the TPO and therefore separate analysis Per contra, the Ld. CIT DR appearing for the Revenue supported the order of the TPO. He pointed out that, the TPO had carried out the directions of the Tribunal and that there was no violation of the same, as in the writ proceedings as well. He further submitted that the findings rendered in AY 2007-08 had no bearing in the relevant year due to change in facts and circumstances of the case. The Ld. DR pointed out that, the royalty paid as opposed to 5% paid during the year and 08 could not be 09 due to timing differences. The Ld. CIT, DR further submitted that, the assessee could not now raise new grounds before this Tribunal that the royalty be benchmarked at the entity level PLI. According to him, the limited issue now required to be adjudicated is whether the royalty rate paid by the assessee was commensurate with contended that, the assessee was unable to factually dislodge the TPO’s findings that the royalty of 5% paid was not lower than industry average and hence urged 9. We have heard both the parties and peruse orders placed before us. The issue in dispute relates to the arm’s length pricing of the international transaction involving payment of royalty by the assessee to its holding company under the CUP Method. The background facts relating to above. We find that the Tribunal in their order dated 06.09.2016 in MA No.93/Mds/2016 in assessee’s case for this AY 2008 that, following the decision rendered by them in AY 2007 rate of royalty payment prevalent in the industry was to be used for ascertaining the arm’s length price and if the same was more than the rate of royalty payment made by the assessee, then no adjustment is warranted. This Tribunal took note of the assessee’ average rate of royalty paid by the company to its holding company during the year was lower than the industry average and therefore set aside this issue back to the TPO to verify the same and decide the same, in light of their decision re noted to have examined the computation of average rate of royalty paid by the company to its holding company and found it to be 5% instead of 3.6%. On the industry average rate, the TPO is noted to have doubted the correctness of the rate of 4.7% obtained by the assessee. This particular action of the TPO, has been contended by the assessee, to be in violation of the directions of this Tribunal. According to the assessee, this IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 14 :: We have heard both the parties and perused the material and orders placed before us. The issue in dispute relates to the arm’s length pricing of the international transaction involving payment of royalty by the assessee to its holding company under the CUP Method. The background facts relating to this issue has already been taken note of above. We find that the Tribunal in their order dated 06.09.2016 in MA No.93/Mds/2016 in assessee’s case for this AY 2008-09 had observed that, following the decision rendered by them in AY 2007-08, the average te of royalty payment prevalent in the industry was to be used for ascertaining the arm’s length price and if the same was more than the rate of royalty payment made by the assessee, then no adjustment is warranted. This Tribunal took note of the assessee’s plea that, the average rate of royalty paid by the company to its holding company during the year was lower than the industry average and therefore set aside this issue back to the TPO to verify the same and decide the same, in light of their decision rendered in AY 2007-08. Thereafter, the TPO is noted to have examined the computation of average rate of royalty paid by the company to its holding company and found it to be 5% instead of 3.6%. On the industry average rate, the TPO is noted to have doubted the correctness of the rate of 4.7% obtained by the assessee. This particular action of the TPO, has been contended by the assessee, to be in violation of the directions of this Tribunal. According to the assessee, this /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. d the material and orders placed before us. The issue in dispute relates to the arm’s length pricing of the international transaction involving payment of royalty by the assessee to its holding company under the CUP Method. The this issue has already been taken note of above. We find that the Tribunal in their order dated 06.09.2016 in MA 09 had observed 08, the average te of royalty payment prevalent in the industry was to be used for ascertaining the arm’s length price and if the same was more than the rate of royalty payment made by the assessee, then no adjustment is s plea that, the average rate of royalty paid by the company to its holding company during the year was lower than the industry average and therefore set aside this issue back to the TPO to verify the same and decide the same, 08. Thereafter, the TPO is noted to have examined the computation of average rate of royalty paid by the company to its holding company and found it to be 5% instead of 3.6%. On the industry average rate, the TPO is noted to have doubted the correctness of the rate of 4.7% obtained by the assessee. This particular action of the TPO, has been contended by the assessee, to be in violation of the directions of this Tribunal. According to the assessee, this Tribunal had taken note of the avera company to its holding company at 3.6%, and therefore the said rate could not have been tinkered with by the TPO which was re him at 5%. The Ld. AR has vehemently contended that the impugned order of the TPO was in excess of jurisdiction and in violation of directions of this Tribunal and therefore the impugned transfer pricing adjustment was required to be quashed. 10. Having perused the directions given by this Tribunal in their order dated 06.09.2016 in MA No. Tribunal given a finding of fact that the average rate of royalty paid by the company to its holding company at 3.6%. Instead, it is observed that, the Tribunal had only taken cognizance of the assessee’s plea tha royalty rate was 3.6% and that it was lower than industry average and accordingly on this plea, this Tribunal had set aside the issue to the AO to verify the same from records and accordingly pass appropriate order. very purpose of remanding the the facts, records and relevant factors are to be and that the correct factual position is ascertained. The directions of this Tribunal are noted to be had acted in accordance with the directions and ascertained the royalty rates of the assessee and the industry average and found that the royalty IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 15 :: Tribunal had taken note of the average rate of royalty paid by the company to its holding company at 3.6%, and therefore the said rate could not have been tinkered with by the TPO which was re him at 5%. The Ld. AR has vehemently contended that the impugned n excess of jurisdiction and in violation of directions of this Tribunal and therefore the impugned transfer pricing adjustment was required to be quashed. Having perused the directions given by this Tribunal in their order dated 06.09.2016 in MA No. 93/Mds/2016, we note that, nowhere had the Tribunal given a finding of fact that the average rate of royalty paid by the company to its holding company at 3.6%. Instead, it is observed that, the Tribunal had only taken cognizance of the assessee’s plea tha royalty rate was 3.6% and that it was lower than industry average and accordingly on this plea, this Tribunal had set aside the issue to the AO to verify the same from records and accordingly pass appropriate order. very purpose of remanding the matter to the TPO was to records and relevant factors are to be objectively and that the correct factual position is ascertained. The directions of this Tribunal are noted to be unambiguous in this regard. We find that had acted in accordance with the directions and ascertained the royalty rates of the assessee and the industry average and found that the royalty /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. ge rate of royalty paid by the company to its holding company at 3.6%, and therefore the said rate could not have been tinkered with by the TPO which was re-computed by him at 5%. The Ld. AR has vehemently contended that the impugned n excess of jurisdiction and in violation of directions of this Tribunal and therefore the impugned transfer pricing adjustment Having perused the directions given by this Tribunal in their order 93/Mds/2016, we note that, nowhere had the Tribunal given a finding of fact that the average rate of royalty paid by the company to its holding company at 3.6%. Instead, it is observed that, the Tribunal had only taken cognizance of the assessee’s plea that the royalty rate was 3.6% and that it was lower than industry average and accordingly on this plea, this Tribunal had set aside the issue to the AO to verify the same from records and accordingly pass appropriate order. The TPO was to ensure that all objectively considered and that the correct factual position is ascertained. The directions of this in this regard. We find that the TPO had acted in accordance with the directions and ascertained the royalty rates of the assessee and the industry average and found that the royalty paid by the assessee was higher. The Ld. AR for the assessee has not been able to point out the factu royalty rate at 5%, which shall be discussed later in this order therefore do not find any merit in this objection being raised by the assessee. We also note that this particular line of argument was tak the assessee in the Writ Petition No.22508 of 2017 preferred before the Hon’ble High Court and the Hon’ble Single Judge in his order dated 16.07.2018 is noted to have rejected the same, by observing as under: “12. The contentions of the learned Sen behalf of the writ petitioner is that the erroneous order of the ITAT dated 27.03.2017 by the Transfer Pricing Officer recorded by the ITAT industry was 4.7% and the writ petitioner had paid only 3.6%, there is no reason to disbelieve the statement of hearing of the matter. In the absence of any incriminating, contra evidences or records, the respondents cannot disbelieve or d the findings made by the ITAT 13. This Court is of an opinion that certain factual details based on the records can be re matter was remanded back for re finding recorded by the ITAT ultimately the case was remanded to the original authority fo consideration by the ITAT re-adjudication, the findings made by the ITAT cannot be taken or relied upon as it is.The very purpose of remanding the matter to the original authority by the Courts/Tribunals are to ensure that all the records and relevant factors are to be re re-adjudicated and a revised order is to be passed. When the order of the ITAT is unambiguous and when the case of the writ petitioner was remanded back for reconsideration in the hands of the original authorities, then the original authorities ar bound to conduct an enquiry by verifying the original records once again and re aspects and accordingly, pass a final order. The said exercise IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 16 :: paid by the assessee was higher. The Ld. AR for the assessee has not been able to point out the factual infirmity in the TPO’s calculation of royalty rate at 5%, which shall be discussed later in this order therefore do not find any merit in this objection being raised by the assessee. We also note that this particular line of argument was tak the assessee in the Writ Petition No.22508 of 2017 preferred before the Hon’ble High Court and the Hon’ble Single Judge in his order dated 16.07.2018 is noted to have rejected the same, by observing as under: The contentions of the learned Senior Counsel appearing on behalf of the writ petitioner is that the erroneous implementation of the order of the ITAT, resulted in issuance of the present impugned order dated 27.03.2017 by the Transfer Pricing Officer(TPO). Once, it is recorded by the ITAT that the average rate of royalty payment in the industry was 4.7% and the writ petitioner had paid only 3.6%, there is to disbelieve the statement of the ITAT recorded during the hearing of the matter. In the absence of any incriminating, contra evidences or records, the respondents cannot disbelieve or d the findings made by the ITAT in its order. This Court is of an opinion that certain factual details based on the records can be re-adjudicated or verified once again when the ter was remanded back for re-consideration. Though finding recorded by the ITAT during the course of presenting the case, ultimately the case was remanded to the original authority fo consideration by the ITAT. When the case was remanded bac adjudication, the findings made by the ITAT cannot be taken or relied upon as it is.The very purpose of remanding the matter to the original authority by the Courts/Tribunals are to ensure that all the records and relevant factors are to be re- adjudicated and a revised order is to be passed. When the order of the ITAT is unambiguous and when the case of the writ petitioner was remanded back for reconsideration in the hands of the original authorities, then the original authorities ar bound to conduct an enquiry by verifying the original records once again and re-adjudicate the matter, re-consider the factual aspects and accordingly, pass a final order. The said exercise /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. paid by the assessee was higher. The Ld. AR for the assessee has not al infirmity in the TPO’s calculation of royalty rate at 5%, which shall be discussed later in this order (infra). We therefore do not find any merit in this objection being raised by the assessee. We also note that this particular line of argument was taken by the assessee in the Writ Petition No.22508 of 2017 preferred before the Hon’ble High Court and the Hon’ble Single Judge in his order dated 16.07.2018 is noted to have rejected the same, by observing as under:- ior Counsel appearing on implementation of the , resulted in issuance of the present impugned order (TPO). Once, it is that the average rate of royalty payment in the industry was 4.7% and the writ petitioner had paid only 3.6%, there is recorded during the hearing of the matter. In the absence of any incriminating, contrary evidences or records, the respondents cannot disbelieve or disrespect This Court is of an opinion that certain factual details based on adjudicated or verified once again when the consideration. Though there is a during the course of presenting the case, ultimately the case was remanded to the original authority for re- When the case was remanded back for adjudication, the findings made by the ITAT cannot be taken or relied upon as it is.The very purpose of remanding the matter to the original authority by the Courts/Tribunals are to ensure -considered, adjudicated and a revised order is to be passed. When the order of the ITAT is unambiguous and when the case of the writ petitioner was remanded back for reconsideration in the hands of the original authorities, then the original authorities are bound to conduct an enquiry by verifying the original records consider the factual aspects and accordingly, pass a final order. The said exercise was done in the present case. Thus, this Court do not find any error on the part of the Transfer Pricing Officer(TPO) in reconsidering the entire books of accounts submitted by the writ petitioner for the purpose of assessing the average rate of royalty payment in the industry. The findings made by the ITAT in the order need not be directly taken into account for the purpose of considering the average rate of royalty payment in the industry in view of the fact that, if that is taken into account, then there is no point in remanding the matter for reconsideration. The ve Courts/Tribunals to remand the matter is that the authorities must reconsider the case in all respects independently and pass a revised order on merits and in accordance with law.This being the scope of the order of remanding t behalf of the writ petitioner that the average rate of royalty payment in the industry was already fixed by the ITAT can have no sanctity. These all are the points raised by the respective parties before the ITAT and the same was r passed by the ITAT. When the ITAT itself was not decided the issues raised before the Tribunal and remanded the case back for reconsideration, then there is no point in recording the findings of the ITAT by the Transfer Pricing Officer exercising the powers of reconsideration of the entire issues. The very contention raised in this regard also deserves no merit consideration.” 11. The above findings of the interfered with by the Hon’ble Division Bench in their order in WA No. 2104 of 2018 dated 12.10.2020. Hence, we are of the considered view, that the TPO had acted factual details regarding the average rate of royalty paid by the assessee and also the industry average rate and her action cannot be said to be bad in law. Accordingly, this particular contention of the asse hereby rejected. IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 17 :: was done in the present case. Thus, this Court do not find any rror on the part of the Transfer Pricing Officer(TPO) in reconsidering the entire books of accounts submitted by the writ petitioner for the purpose of assessing the average rate of royalty payment in the industry. The findings made by the ITAT r need not be directly taken into account for the purpose of considering the average rate of royalty payment in the industry in view of the fact that, if that is taken into account, then there is no point in remanding the matter for reconsideration. The very purpose and object of the Courts/Tribunals to remand the matter is that the authorities must reconsider the case in all respects independently and pass a revised order on merits and in accordance with law.This being the scope of the order of remanding the contentions raised on behalf of the writ petitioner that the average rate of royalty payment in the industry was already fixed by the ITAT can have no sanctity. These all are the points raised by the respective parties before the ITAT and the same was recorded in the order passed by the ITAT. When the ITAT itself was not decided the issues raised before the Tribunal and remanded the case back for reconsideration, then there is no point in recording the findings of the ITAT by the Transfer Pricing Officer(TPO) at the time of exercising the powers of reconsideration of the entire issues. The very contention raised in this regard also deserves no merit (emphasis supplied) The above findings of the Hon’ble Single Judge was also not the Hon’ble Division Bench in their order in WA No. 2104 of 2018 dated 12.10.2020. Hence, we are of the considered view, that the TPO had acted well within her powers of re-considering the entire factual details regarding the average rate of royalty paid by the assessee and also the industry average rate and her action cannot be said to be bad in law. Accordingly, this particular contention of the asse /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. was done in the present case. Thus, this Court do not find any rror on the part of the Transfer Pricing Officer(TPO) in reconsidering the entire books of accounts submitted by the writ petitioner for the purpose of assessing the average rate of royalty payment in the industry. The findings made by the ITAT r need not be directly taken into account for the purpose of considering the average rate of royalty payment in the industry in view of the fact that, if that is taken into account, then there is no point in remanding the matter for ry purpose and object of the Courts/Tribunals to remand the matter is that the authorities must reconsider the case in all respects independently and pass a revised order on merits and in accordance with law.This being he contentions raised on behalf of the writ petitioner that the average rate of royalty payment in the industry was already fixed by the ITAT can have no sanctity. These all are the points raised by the respective ecorded in the order passed by the ITAT. When the ITAT itself was not decided the issues raised before the Tribunal and remanded the case back for reconsideration, then there is no point in recording the findings (TPO) at the time of exercising the powers of reconsideration of the entire issues. The very contention raised in this regard also deserves no merit (emphasis supplied) Single Judge was also not the Hon’ble Division Bench in their order in WA No. 2104 of 2018 dated 12.10.2020. Hence, we are of the considered view, considering the entire factual details regarding the average rate of royalty paid by the assessee and also the industry average rate and her action cannot be said to be bad in law. Accordingly, this particular contention of the assessee is 12. We now take up the assessee’s new alternate contention proposing application of entity level TNMM benchmarking methodology for ascertaining the arm’s length price of the royalty payments. In this regard, it is noted that, this their order in MA No.93/Mds/2016 following their decision rendered in assessee’s own case for earlier year/s had specifically directed for separate benchmarking of royalty payment, which was to be undertaken by comparing the royalty rate paid by the assessee with the industry average rate and, accordingly transfer pricing adjustment, if any, was to be made. The specific directions of the Tribunal note of at Para 2 above. Neither the as any appeal against the said findings of this Tribunal in as much as the same has attained finality. According to us therefore, neither the AO nor this Tribunal now can go beyond these directions given by the earlier coordinate Bench in the first round of proceedings. The scope of the present appeal in the second round of proceedings is thus limited to benchmarking the royalty payment, by adopting the pricing methodology set out in the order of this Tribunal in MA No.93/Mds/2 method or mechanism can now be brought in. Accordingly, the assessee’s altogether new contention proposing to benchmark the impugned transaction by adopting entity level TNMM, which was not raised in the first round of proceedings, cannot IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 18 :: We now take up the assessee’s new alternate contention proposing application of entity level TNMM benchmarking methodology for ascertaining the arm’s length price of the royalty payments. In this regard, it is noted that, this Tribunal in the first round of proceedings vide their order in MA No.93/Mds/2016 following their decision rendered in assessee’s own case for earlier year/s had specifically directed for separate benchmarking of royalty payment, which was to be undertaken by comparing the royalty rate paid by the assessee with the industry average rate and, accordingly transfer pricing adjustment, if any, was to be made. The specific directions of the Tribunal have already been taken note of at Para 2 above. Neither the assessee nor the Revenue had filed any appeal against the said findings of this Tribunal in as much as the same has attained finality. According to us therefore, neither the AO nor this Tribunal now can go beyond these directions given by the earlier ate Bench in the first round of proceedings. The scope of the present appeal in the second round of proceedings is thus limited to benchmarking the royalty payment, by adopting the pricing methodology set out in the order of this Tribunal in MA No.93/Mds/2016, and no other method or mechanism can now be brought in. Accordingly, the assessee’s altogether new contention proposing to benchmark the impugned transaction by adopting entity level TNMM, which was not raised in the first round of proceedings, cannot now be entertained. This would now /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. We now take up the assessee’s new alternate contention proposing application of entity level TNMM benchmarking methodology for ascertaining the arm’s length price of the royalty payments. In this Tribunal in the first round of proceedings vide their order in MA No.93/Mds/2016 following their decision rendered in assessee’s own case for earlier year/s had specifically directed for separate benchmarking of royalty payment, which was to be undertaken by comparing the royalty rate paid by the assessee with the industry average rate and, accordingly transfer pricing adjustment, if any, was to already been taken sessee nor the Revenue had filed any appeal against the said findings of this Tribunal in as much as the same has attained finality. According to us therefore, neither the AO nor this Tribunal now can go beyond these directions given by the earlier ate Bench in the first round of proceedings. The scope of the present appeal in the second round of proceedings is thus limited to benchmarking the royalty payment, by adopting the pricing methodology 016, and no other method or mechanism can now be brought in. Accordingly, the assessee’s altogether new contention proposing to benchmark the impugned transaction by adopting entity level TNMM, which was not raised in the now be entertained. This would now defeat the specific directions issued by the Tribunal in their order (supra) and require us to sit in judgment over the earlier decision rendered in the first round of proceedings, which according to us, would be own order passed earlier, which power we don’t enjoy alternate contention is also rejected. 13. In light of our above findings, the issue which now requires consideration is whether the royalty rate paid by the assessee to its holding company was commensurate with the industry average or not. For this, we first have to ascertain the average royalty rate paid by the assessee. From the order of the TPO, it is noted that, the assessee had made royalty payment of 7275.94 crores, which in percentage terms works out to The Ld. AR in his written submissions at Para 4.12 has made a bald statement that the rate of royalty computed is incorrect as the same has been computed by the TPO sales. The Ld. AR however has not pointed out the specific error or infirmity in the denominator placed before us, we also do not find any infirmity in the calcula TPO. Accordingly, the average rate of royalty paid by the assessee to its holding company during the year is found to be 5%. Now we come to the computation of industry average rate of royalty. It is noted that, both in IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 19 :: defeat the specific directions issued by the Tribunal in their order (supra) and require us to sit in judgment over the earlier decision rendered in the first round of proceedings, which according to us, would be own order passed earlier, which power we don’t enjoy. According alternate contention is also rejected. In light of our above findings, the issue which now requires consideration is whether the royalty rate paid by the assessee to its lding company was commensurate with the industry average or not. For this, we first have to ascertain the average royalty rate paid by the assessee. From the order of the TPO, it is noted that, the assessee had royalty payment of Rs.364.10 crores as against the net sales of Rs. , which in percentage terms works out to 5% The Ld. AR in his written submissions at Para 4.12 has made a bald statement that the rate of royalty computed is incorrect as the same has the TPO by reckoning a wrong denominator of net . The Ld. AR however has not pointed out the specific error or denominator i.e. net sales. Having perused the material placed before us, we also do not find any infirmity in the calcula TPO. Accordingly, the average rate of royalty paid by the assessee to its holding company during the year is found to be 5%. Now we come to the computation of industry average rate of royalty. It is noted that, both in /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. defeat the specific directions issued by the Tribunal in their order (supra) and require us to sit in judgment over the earlier decision rendered in the first round of proceedings, which according to us, would be reviewing our . Accordingly, this In light of our above findings, the issue which now requires consideration is whether the royalty rate paid by the assessee to its lding company was commensurate with the industry average or not. For this, we first have to ascertain the average royalty rate paid by the assessee. From the order of the TPO, it is noted that, the assessee had gainst the net sales of Rs. 5% of the sales. The Ld. AR in his written submissions at Para 4.12 has made a bald statement that the rate of royalty computed is incorrect as the same has by reckoning a wrong denominator of net . The Ld. AR however has not pointed out the specific error or i.e. net sales. Having perused the material placed before us, we also do not find any infirmity in the calculation of the TPO. Accordingly, the average rate of royalty paid by the assessee to its holding company during the year is found to be 5%. Now we come to the computation of industry average rate of royalty. It is noted that, both in AYs 2006-07 & 2007-08, th automotive industry was considered and ascertained to be 4.7%. The relevant findings recorded by this Tribunal in assessee’s own case for AY 2007-08 in ITA No.2157/Mds/2011 “6.5 Further perusing the & 26 the Ld. TPO herself observed that in respect of royaltypayment in automotive sector from the study of 35 licenses, the averageworks out to 4.7% and the median works out to 4% which is higher thanthe appellant’s average rate of royalty payment of 4.22%. Further theLd. TPO has observed that the assessee company has been bestowedwith the latest technology by its Holding Company and it cannot be saidthat old technology has been dumped in the Indian market (par TPO’s order).The relevant portion of the Ld. TPO’s order is extractedherein below for reference: “26 In the table given above it is seen that in automotive sector onstudy of 35 licenses in res was 1% maximum was 15% royalty payment.Average comes to 4.7% and the median royalty rate was 4.0% ….. Facts being so, it is apparent that the Ld. TPO has herself accepted thehigh tech technology passed on to the assessee company from its HoldingCompany and als aconclusion that the royalty payment of 4.7% is prevalent in theautomotive sector.” 14. Following the above, automotive industry which involves usage of several exclusive licenses, technical upgradation, usage of advance technology [which are upgraded every year] industry average rate of royalty of 4.7% ascertained in the immediately preceding the royalty payment for the relevant year as well IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 20 :: 08, the industry average rate of royalty in the automotive industry was considered and ascertained to be 4.7%. The relevant findings recorded by this Tribunal in assessee’s own case for AY ITA No.2157/Mds/2011 is as follows:- 6.5 Further perusing the order of the Ld. TPO in page 40 in paraNos.25 & 26 the Ld. TPO herself observed that in respect of royaltypayment in automotive sector from the study of 35 licenses, the averageworks out to 4.7% and the median works out to 4% which is higher thanthe lant’s average rate of royalty payment of 4.22%. Further theLd. TPO has observed that the assessee company has been bestowedwith the latest technology by its Holding Company and it cannot be saidthat old technology has been dumped in the Indian market (par TPO’s order).The relevant portion of the Ld. TPO’s order is extractedherein below for reference:- “26 In the table given above it is seen that in automotive sector onstudy of 35 licenses in respect to royalty payment minimum royalty payment 1% maximum was 15% royalty payment.Average comes to 4.7% and the median royalty rate was 4.0% Facts being so, it is apparent that the Ld. TPO has herself accepted thehigh tech technology passed on to the assessee company from its HoldingCompany and also after details study of 35 licenses arrived at aconclusion that the royalty payment of 4.7% is prevalent in theautomotive sector.” Following the above, and considering the peculiar nature of automotive industry which involves usage of several exclusive licenses, technical upgradation, usage of advance technology [which are upgraded industry average rate of royalty of 4.7% ascertained in the year serves as a good barometer to benchmark the royalty payment for the relevant year as well. We therefore note that, /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. e industry average rate of royalty in the automotive industry was considered and ascertained to be 4.7%. The relevant findings recorded by this Tribunal in assessee’s own case for AY order of the Ld. TPO in page 40 in paraNos.25 & 26 the Ld. TPO herself observed that in respect of royaltypayment in automotive sector from the study of 35 licenses, the averageworks out to 4.7% and the median works out to 4% which is higher thanthe lant’s average rate of royalty payment of 4.22%. Further theLd. TPO has observed that the assessee company has been bestowedwith the latest technology by its Holding Company and it cannot be saidthat old technology has been dumped in the Indian market (para 27 ofthe TPO’s order).The relevant portion of the Ld. TPO’s order is “26 In the table given above it is seen that in automotive sector onstudy royalty payment 1% maximum was 15% royalty payment.Average comes to 4.7% Facts being so, it is apparent that the Ld. TPO has herself accepted thehigh tech technology passed on to the assessee company from its o after details study of 35 licenses arrived at aconclusion that the royalty payment of 4.7% is prevalent in peculiar nature of automotive industry which involves usage of several exclusive licenses, technical upgradation, usage of advance technology [which are upgraded industry average rate of royalty of 4.7% ascertained in the year serves as a good barometer to benchmark We therefore note that, the assessee has paid excess royalty of 0.3% [5% to Rs.21.83 crores [0.3% of Rs. the directions given in the first round of proceedings by this Tribunal, the transfer pricing adjustment in relation to royalty payment works out to Rs.21.83 crores and accordingly the remaining adjustment of Rs.65.05 crores [86.88 crores - 21.83 deleted. 15. In the result, appeal filed by the assessee Order pronounced on the Sd/- (अिमताभशु\u0018ा) (AMITABH SHUKLA लेखासद\u0007य/ACCOUNTANT MEMBER चे\u0003ई/Chennai, \u0005दनांक/Dated: 09th December TLN, Sr.PS आदेशक\r\u000eितिलिपअ\u0014ेिषत/Copy to 1. अपीलाथ\r/Appellant 2. \u000e\u000fथ\r/Respondent 3. आयकरआयु\u0015/CIT, Chennai / 4. िवभागीय\u000eितिनिध/DR 5. गाड\u001eफाईल/GF IT (TP) A No.24/Chny/20 M/s. Hyundai Motor India Ltd. :: 21 :: the assessee has paid excess royalty of 0.3% [5%-4.7%] which works out to Rs.21.83 crores [0.3% of Rs.7275.94 crores]. Accordingly, in the directions given in the first round of proceedings by this Tribunal, the transfer pricing adjustment in relation to royalty payment works out to Rs.21.83 crores and accordingly the remaining adjustment of Rs.65.05 21.83 crores] made by the TPO, is directed to be In the result, appeal filed by the assessee is partly allowed. Order pronounced on the 09th day of December, 2024 AMITABH SHUKLA) /ACCOUNTANT MEMBER Sd/ (एबीटी. (ABY T. VARKEY \tयाियकसद\u0007य/JUDICIAL MEMBER December, 2024. Copy to: , Chennai / Madurai / Salem / Coimbatore. /Chny/2020 (AY 2008-09) M/s. Hyundai Motor India Ltd. 4.7%] which works out crores]. Accordingly, in light of the directions given in the first round of proceedings by this Tribunal, the transfer pricing adjustment in relation to royalty payment works out to Rs.21.83 crores and accordingly the remaining adjustment of Rs.65.05 crores] made by the TPO, is directed to be is partly allowed. 24, in Chennai. Sd/- . वक ) ABY T. VARKEY) /JUDICIAL MEMBER Madurai / Salem / Coimbatore. "