Press note issued regarding FDI policy and prescribing the percentage of the royalty to the sales allowed under automatic route and cannot substitute as ALP to be determined under the provisions of the Act and Rules. FDI policy permitting certain percentage of payment of royalty is only for remittance of the amount in foreign exchange and therefore, such permission given in an entirely different context and purpose cannot be considered as relevant for determination of the ALP under I T Act.
The Hon’ble Delhi High Court in the case of Nestle India Ltd has held that the purpose of such permission is given by the RBI is totally different. The RBI is only concerned with the foreign exchange and, therefore, would look into the matter from that point of view. The RBI, at the time of giving such permission would not keep in mind the provisions of the I T Act and that is the function of the income tax authorities and, cannot be validly go into such an issue.
Similarly view has been taken by the Ahmedabad Benches of the Tribunal in the case of Bisaza India P Ltd (supra). When a proper mechanism is provided under the provisions of the I T Act and Rules for determination of the ALP, then the approval by other than the I T Authorities, for the purpose of remittance/outflow of the foreign exchange, does not ipso facto, partake the character of ALP, which has to be determined as per TP regulations. Hence, we do not find any substance or merit in the assesse’s stand that when the payment of royalty is within the prescribed limit of press note no.9 of 2000 FDI policy, the same is at ALP.
ITAT MUMBAI ‘K’ BENCH
ITA No. 6175/Mum/2011
(Asst Year 2007-08)
SKOL Breweries Ltd.
Vs
The Asst Commr of Income Tax, Mumbai
Date of pronouncement -18th JAN 2013
ORDER
PER VIJAY PAL RAO, JM
This appeal by the assessee is directed against the assessment order dated 29th July 2011 passed u/s 143(3) r.w.s 144C(13) in pursuant to the directions of the DRP u/s 1 44C(5) of the I T Act for the Assessment Year 2007-08.
2 The assessee has raised the following concise grounds in this appeal.
1. That the order of the assessment dated July 29, 2011 framed on the directions of learned Dispute Resolution Panel (“DRP”) under section 144C(5) of the Act is bad both on facts and in law.
1.1 That in framing the order of the assessment, the Learned Assessing Officer (“Ld. AO”) has overlooked the declared return in the revised computation of income and as such, various dis allowances made as have been made are on misconceived facts and highly arbitrary and unjustified both on the facts and in law.
