Brief about the case
The assessee-company was engaged in the business of manufacture of pre-engineered building system products. During relevant year, assessee entered into international transactions with its AE situated in Kuwait. In course of said transactions, assessee paid royalty to its AE at the rate of 7.5 per cent of sales. The TPO took a view that assessee had not derived any benefit from services rendered by AE requiring payments in question. He thus took ALP of said payments at nil. Accordingly, the TPO made addition to assessee’s ALP in respect of royalty payments made to AE. The DRP noticed that the Tribunal, in assessee’s own case for the assessment year 2006-07 onwards, had considered this issue at length and had come to the conclusion that it was not required by the assessee to demonstrate that payment of royalty was justified because agreements were periodically approved by the RBI and by the Ministry of Industries and the assessee was paying the amount as per the agreements. The DRP following aforesaid orders of the Tribunal, deleted the addition made by the TPO. Revenue knocked the doors of ITAT. It was held by the ITAT (Hyderabad) since DRP had only followed decision of ITAT in assessee’s own case for earlier assessment years, impugned order passed by DRP did not require any interference and therefore the addition was deleted.
Detail
Facts of the case:
