Toyota Boshoku Automotive India Private Limited Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that disallowance of entire royalty payment by taking ALP at NIL not justified since there is no change in facts, circumstances or functions and hence principle of consistency should be applied. Accordingly, TPO directed to determine ALP of royalty using TNMM as most appropriate method.
Facts- The assessee company is jointly owned by Tayota Boshoku Corporation-Japan (70%), Tayota Boshoku Asia Company Ltd- Thailand (25%) and Tayota Tsusho Corporation- Japan (5%). The assessee company is engaged in the business of manufacturing of automotive components such as seats, door trims and interior of passenger cars. For carrying out the manufacturing activity of automotive components, it has obtained licence from parent company namely Tayota Boshoku Corporation-Japan for which the assessee has been paying royalty. During the year under consideration, the assessee has paid royalty of Rs. 29,43,07,119/- which was claimed to be at ALP.
The TPO benchmarked the Royalty payment of Rs. 45,83,94,469/- to NIL, resulting in a Transfer Pricing (TP) adjustment of the same amount. The TPO also noted that TBI failed to provide a detailed breakup of Royalty payments related to transactions with both related and unrelated parties. Due to this non-disclosure, the entire Royalty payment was assumed to be linked to intra-group transactions and was disallowed in full.
