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"(a) The assessee has provided technical and R&D support, know-how, information operational Dabur India Ltd.

improvement and skills in the areas of the cost management, manufacturing, production procurement, sale, marketing and distribution of products in the Territory to M/s Dabur International Ltd. and has charged licence fees @ 3% of FOB sale (net of taxes and sales return).

(b) the assessee has allowed use of its trade mark/trade name "Dabur" to the M/s Dabur International Ltd. in lieu of royalty payment of 1% of the FOB sale (net of taxes and sale return).

9.7 Dabur International Ltd.

The appellant has entered into an agreement dated 01.04.2003 with Redrock Ltd. (presently Dabur International Ltd.) which inter-alia provided for technical and R&D support, know-how, information, operational improvements and skills in area of cost Dabur India Ltd.

management, manufacturing, production procurement, sale marketing and distribution of products. It also permitted Redrock to use Dabur logo on both products manufactured by using Dabur's technology and know-how and also products manufactured by it without Dabur's know- how. As per clause 4 of the agreement, Dabur India is entitled to royalty of 3% of FOB sales of Redrock of Dabur branded products which are manufactured using Dabur's know How and 1% of FOB sales of Dabur branded products manufactured without using technical and R&D support from Dabur. Based on this, the TPO has computed royalty chargeable from Dabur International Ltd. @ 4% of sales while the appellant has not declared any royalty income. The appellant has contended that w.e.f. 01.04.2005, this agreement has been terminated and has furnished letters dated 07.04.2005 and 01.02.2013. The appellant has further contended that Dabur International was not sourcing any technical know-how from Dabur India for its products manufactured in UAE and has furnished letters dated 18.07.2011 and 20.07.2011 which state that products manufactured by Dabur International Ltd. in UAE are different from those manufactured in India and no technical support from Dabur India is being taken for the purpose.

furnished working of royalty at Rs. 75.27 lakhs on FOB sales of Rs. 7526.84 lakhs ie. @ 1%. This fact has been mentioned in para 7.9 and 7.16 of TPO's order. Rejecting this computation of the appellant, TPO has worked out royalty @ 4% of FOB sales. This approach of TPO is faulty because even if it is assumed that Dabur International has manufactured all its products by using technical know-how of Dabur India, royalty shall be payable @ 3% as per clause 4(a) above and in that case, sub-clause(b) shall not come into operation. However, considering the material furnished by the appellant, it is seen that products manufactured by Dabur International in UAE are different from those manufactured in India and in case of same name of products, it has been shown that oil base (raw material) is different from those products manufactured in India. Therefore, it can be safely inferred that most of the products if not all manufactured in UAE are being manufacture without technical support from Dabur India. In view of this, there shall be a portion of FOB sales on which royalty becomes payable @ 3% and another substantial portion of FOB sales on which royalty shall become payable @1%. Under no circumstances, royalty shall become payable @ 4% on total FOB sales as held by TPO. In view of these facts, it shall be more realistic and reasonable if royalty payable is worked out @ 2% on total FOB sales i.e. average rate. Accordingly, I hold that arm's length price of royalty from Dabur International is Rs. 150.52 lakhs. The AO is directed to give relief to the appellant on this account accordingly.

royalty was to be paid to the assessee and the TPO was justified in working out the royalty from M/s Dabur International Ltd., UAE @ 4% and M/s Dabur Nepal Pvt. Ltd. @ 7.5% on FOB sales which was in accordance with the agreement effective from 1 st April, 2004 and the ld. CIT(A) was not justified in reducing the royalty @ 2% on FOB sales. He requested to restore the order of the TPO and set aside the impugned order passed by the ld. CIT(A).

33. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee had not shown any receipt on account of royalty from M/s Dabur International Ltd., UAE and had shown royalty of Rs.5.34 lacs from M/s Dabur Nepal Pvt. Ltd. on the FOB sales of Rs.7526.84 lacs and Rs.3319.50 lacs respectively. The TPO worked out the royalty @ 4% of the sales in the case of Dabur International Ltd. and @ 7.5% of the sale in the case of Dabur Nepal Pvt. Ltd. The ld. CIT(A) reduced the royalty @ 2% of FOB sales. In the instant case, it is noticed that the assessee earlier entered into an agreement with M/s Redrock Ltd. who was registered in the Channel Island, U.K with its principal office at 54-58, Althol Street, Doughlas, Isle of Man, U.K. and had been Dabur India Ltd.