JCB India Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that Transfer Pricing Adjustment in respect of transaction of payment of royalty is set aside and Transfer Pricing Officer [TPO] is directed to accept the parameters of determination of compensation as accepted in Advance Pricing Agreement [APA].
Facts- JCB India Limited (‘JCB India’ or ‘Appellant’) is a subsidiary of J.C. Bamford Excavators Ltd., U.K (‘JCB UK’) and is engaged in manufacturing and trading of excavators/loaders/construction equipment, spares and components. Assessee has claimed that since establishment of the Appellant, JCB UK had licensed its proprietary technology to Appellant through various collaboration agreements. The Appellant had entered into Technology Transfer Agreements (‘TTA’) with its Associated Enterprises (‘AEs’) to receive requisite technology and know-how to enable it to manufacture technological advanced products of earthmoving and construction equipment.
During the Assessment year 2013-14, the Appellant entered into various international transactions with its AEs. The Transfer Pricing Officer (‘TPO’) accepted all the international transactions except the transaction of payment of royalty in relation to licensed manufacturing segment of the Appellant on various models.
In the first round of assessment proceedings the TPO in his order dated October 20, 2016, made TP adjustment of INR 1,21,40,52,000 by treating the arm’s length price of royalty paid at 2% as against the 5% royalty paid by the Appellant.
