Allowing the appeal of the assessee the Tribunal held that the Assessing Officer had only questioned the fair market value of the expenses and not the legitimate need for the expenses or the benefit derived from the expenses. /The provisions of section 40A(2)(b) are general provision as compared to the specific provisions of the transfer pricing, the Assessing Officer was required to compare the royalty expenses paid in the case of the similar products by other companies during the relevant period. The Assessing Officer had not done any such exercise. The disallowance made out of royalty expenses amounting was deleted.( AY.2016-17)
De Diamond Electric India Pvt. Ltd. v. ACIT (2020)81 ITR 32 (SN) / 195 DTR 97/ 207 TTJ 359(Delhi) (Trib)
S. 40A(2): Expenses or payments not deductible – Excessive or unreasonable – Transfer pricing – Royalty – Transfer pricing provision is specific provision – Assessing Officer was required to compare the royalty expenses paid in the case of the similar products by other companies during the relevant period- Disallowance is held to be not valid [ S.92C ].