Dismissing the appeal the Court held that the Transfer Pricing Officer could not question the commercial expediency of the assessee in hiring expatriate employees for rendering assistance and could not supplant his opinion in place of the assessee in regard to the need for such services.  That the arm’s length price in respect of royalty could not be determined as nil on the ground that the assessee had incurred losses. The fact that the assessee had incurred a loss in its business, did not necessarily mean that the value of the utilities availed of by it or the value of the labour employed was nil. The arm’s length analysis is not concerned with the commercial expediency of incurring costs. It was merely confined to determining the arm’s length price of the material or the services used. The decision of the assessee to procure technical know-how for its activities was a commercial decision. This decision was not subject of a review on the merits by the Transfer Pricing Officer who was to merely examine whether the amount paid by the assessee for acquiring the technical know-how was on arm’s length basis. The cost paid for technical know-how was one of the elements of costs, which was incurred by the assessee for carrying on its business. The conclusion of the Transfer Pricing Officer that since royalty was paid for technical know-how, the fact that the assessee had not earned profit was indicative that the value of technical know-how, if any, received by the assessee was nil was flawed. There was no infirmity in the decision of the Commissioner (Appeals) or the Tribunal in setting aside the arm’s length price adjustment made by the Assessing Officer on the recommendation of the Transfer Pricing Officer. Order of Tribunal affirmed. (AY. 2007-08, 2009-10)