{"id":785,"date":"2015-12-17T10:41:20","date_gmt":"2015-12-17T10:41:20","guid":{"rendered":"http:\/\/carajput.com\/blog\/?p=785"},"modified":"2021-12-16T18:50:49","modified_gmt":"2021-12-16T13:20:49","slug":"no-tp-adjustment-for-royalty-calculated-on-basis-of-new-exchange-control-policy-as-it-was-less-than-earlier-year","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/no-tp-adjustment-for-royalty-calculated-on-basis-of-new-exchange-control-policy-as-it-was-less-than-earlier-year\/","title":{"rendered":"No TP adjustment for royalty"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e5989d1f47f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e5989d1f47f\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/no-tp-adjustment-for-royalty-calculated-on-basis-of-new-exchange-control-policy-as-it-was-less-than-earlier-year\/#No_TP_adjustment_for_royalty_calculated_on_basis_of_new_exchange_control_policy_as_it_was_less_than_the_earlier_year\" title=\"No TP adjustment for royalty calculated on basis of new exchange control policy as it was less than the earlier year\">No TP adjustment for royalty calculated on basis of new exchange control policy as it was less than the earlier year<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/no-tp-adjustment-for-royalty-calculated-on-basis-of-new-exchange-control-policy-as-it-was-less-than-earlier-year\/#ACIT_v_Oracle_India_P_Ltd_ITA_No_1432_of_2011_Date_of_Decision_October_14_2015_Facts_of_the_Case\" title=\"ACIT v. Oracle India (P.) Ltd., ITA No. 1432 of 2011, Date of Decision: October 14, 2015 \n \n Facts of the Case\">ACIT v. Oracle India (P.) Ltd., ITA No. 1432 of 2011, Date of Decision: October 14, 2015 \n \n Facts of the Case<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/no-tp-adjustment-for-royalty-calculated-on-basis-of-new-exchange-control-policy-as-it-was-less-than-earlier-year\/#Read_our_articles_Top_Taxation_Relaxation_to_MSMS\" title=\"Read our articles: \u00a0Top Taxation Relaxation to MSMS\">Read our articles: \u00a0Top Taxation Relaxation to MSMS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/no-tp-adjustment-for-royalty-calculated-on-basis-of-new-exchange-control-policy-as-it-was-less-than-earlier-year\/#Highlights_of_International_Taxation\" title=\"Highlights of International Taxation\">Highlights of International Taxation<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h3 style=\"text-align: justify;\"><\/h3>\n<figure id=\"attachment_9024\" aria-describedby=\"caption-attachment-9024\" style=\"width: 813px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/31.png\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-9024\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/12\/31.png\" alt=\"www.carajput.com; Contect with us\" width=\"813\" height=\"534\" \/><\/a><figcaption id=\"caption-attachment-9024\" class=\"wp-caption-text\">www.carajput.com; Connect with us<\/figcaption><\/figure>\n<h2 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"No_TP_adjustment_for_royalty_calculated_on_basis_of_new_exchange_control_policy_as_it_was_less_than_the_earlier_year\"><\/span><span style=\"color: #000080;\"><strong>No TP adjustment for royalty calculated on basis of new exchange control policy as it was less than the earlier year<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"ACIT_v_Oracle_India_P_Ltd_ITA_No_1432_of_2011_Date_of_Decision_October_14_2015_Facts_of_the_Case\"><\/span><span style=\"color: #000000;\"><strong>ACIT v. Oracle India (P.) Ltd., ITA No. 1432 of 2011, <\/strong><strong>Date of Decision: October 14, 2015<br \/>\n<\/strong><\/span><br \/>\n<span style=\"color: #ff9900;\"> <strong><span style=\"text-decoration: underline;\">Facts of the Case<\/span><\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\">The assessee was a wholly-owned subsidiary of Oracle Corporation, US which was a leading supplier for information management software products. It had been set up in India for distributing Oracle licensed products and for providing contract software development to its associated enterprise (AE).<\/p>\n<p style=\"text-align: justify;\">In regard to functions relating to sales and distribution, the assessee had entered into a software duplication and distribution license agreement (Distribution agreement) with Oracle USA under which the assessee had been granted a non-exclusive, non-assignable right to duplicate and sub-license Oracle products in India.<\/p>\n<p style=\"text-align: justify;\">For this purpose, the assessee imported master copies of software from Oracle USA, and the same were duplicated in India and sub-licensed to third parties and users (&#8216;customers&#8217;) directly or through local sub-distributors or partners.<\/p>\n<p style=\"text-align: justify;\">In lieu of duplication and distribution rights granted by Oracle USA under the Distribution Agreement, the assessee paid royalty to Oracle USA subject to 56 percent of a license, updates, and product support revenue realized by the assessee from sub-licensing of Oracle products in India.<\/p>\n<p style=\"text-align: justify;\">The Transfer Pricing Officer (TPO) observed that the department had been considering 30 percent on actual sales as the proper royalty payout and, therefore, 56 percent of actual sales paid by the assessee was very high which had no linkage with the functions performed by the assessee and therefore, restricted the payment of royalty at the rate of 30 percent of actual sales and held that there was excess payment in respect of royalty.<\/p>\n<p><span style=\"color: #ff9900;\"><strong><span style=\"text-decoration: underline;\">The decision of the Tribunal<\/span><\/strong><\/span><\/p>\n<p style=\"text-align: justify;\">The Appellate Tribunal while dismissing the Revenue\u2019s appeal held that the new <a href=\"https:\/\/carajput.com\/blog\/category\/sebi\/\">Exchange<\/a> Control Policy had removed the limits of the royalty payment for duplication and sub-licensing activity.<\/p>\n<p style=\"text-align: justify;\">Once the liberalized policy did away with the requirement of computing the royalty payable with reference to the list price, the assessee moved from royalty payment as the percentage of list price to actual license and support review.<\/p>\n<p style=\"text-align: justify;\">The main object was to determine the royalty payment having regard to market forces. Thus, the assessee had clearly pointed out the reason for shifting the basis from list price to actual sales which were not found to be wrong in any manner.<\/p>\n<p style=\"text-align: justify;\">Further, the assessee had clearly demonstrated that the effective rate of royalty being incurred by the assessee in prior years, as compared to the current year, was more.<\/p>\n<p style=\"text-align: justify;\">It was further held that once the assessee clearly demonstrates that the effective royalty payout was less than earlier years then there was no reason to make any adjustment in the royalty payout.<\/p>\n<p style=\"text-align: justify;\">Hope the information will assist you in your Professional endeavors. For query or help, contact: <a href=\"mailto:singh@carajput.com\">singh@carajput.com<\/a>\u00a0or call at 9555555480<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Read_our_articles_Top_Taxation_Relaxation_to_MSMS\"><\/span>Read our articles: \u00a0<a href=\"https:\/\/carajput.com\/blog\/relevant-parts-of-the-honorable-fm-press-conference\/\">Top Taxation Relaxation to MSMS<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<h4><span class=\"ez-toc-section\" id=\"Highlights_of_International_Taxation\"><\/span><a href=\"https:\/\/carajput.com\/blog\/international-taxation\/\">Highlights of International <\/a><a href=\"https:\/\/www.caindelhiindia.com\/blog\/presumptive-taxation-section-44ad-44ada-44ae\/\">Taxation<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n","protected":false},"excerpt":{"rendered":"<p>No TP adjustment for royalty calculated on basis of new exchange control policy as it was less than the earlier year ACIT v. Oracle India (P.) Ltd., ITA No. 1432 of 2011, Date of Decision: October 14, 2015 Facts of the Case The assessee was a wholly-owned subsidiary of Oracle Corporation, US which was a &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[3895,3896,3897,3816],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/785"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=785"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/785\/revisions"}],"predecessor-version":[{"id":9025,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/785\/revisions\/9025"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=785"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=785"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=785"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}