The Bombay High Court Upheld the assessee’s appeal on Transfer Pricing Adjustments, emphasizes consistency in royalty payment aggregation approach.
Facts
These appeals are filed by Assessee under Section 260A of the Income Tax Act 1961 against the order dated 28th September 2022 passed by the Income Tax Appellate Tribunal (ITAT) for A.Y.2015-2016, 2016-2017 and 2017-2018. The issue is in respect of transfer pricing adjustments.
Submissions
Advocate Mistri submitted that the Tribunal was not justified in rejecting the contention of Assessee with respect to aggregation approach of royalty payment with other international transaction in the manufacturing segment for determining the ALP activity carried on by Assessee.
Suresh Kumar submitted that the TPO has not disputed the fact that the Assessee has received technology. The TPO has also accepted and acknowledged that Assessee has used the TNMM method as the most appropriate method to benchmark its international transactions all under the manufacturing activity which included the royalty that it has paid on the export sales as well.
Decision
The division bench of Justice Firdosh P. Pooniwalla and Justice K.R. Shriram observed that once the Tribunal in its earlier orders has held that the transaction of payment of royalty for use of technology is inextricably linked with manufacturing activity and should be aggregated with other international transactions in the manufacturing segment for the purposes of benchmarking the same, and the TPO having accepted the aggregating of international transaction of payment of royalty with other international transactions in the manufacturing segment and not drawn any adverse inferences in respect of such aggregation of royalty payment under identical agreement, the Tribunal should have followed the order of the co-ordinate bench rendered under identical facts.
The court held that when in a majority of the years from the Assessment Year 2006-07 up to the Assessment Year 2014-15 it was under the very same agreement and the orders were passed after thoroughly scrutinising the international transactions entered into by assessee, the transfer pricing report obtained and the transfer pricing documentation maintained.
Case title: Cummins India Limited v/s Assistant Commissioner of Income ) Tax
Citation: Income Tax Appeal No.126 Of 2023
