Decision that sales percentage-based royalty payments are deductible even when sales were mainly to a related party in India

The Mumbai Income Tax Appellate Tribunal issued its decision on 19 December 2012 in the case of SC Enviro Agro India Private Limited v. DCIT (I.T.A. No. 6060/Mum/2011) that the transfer pricing authorities are not allowed to examine the business expediency of royalty paid by the Taxpayer (i.e. Enviro Agro India Private Limited), an Indian company, to its associated enterprise in Japan. It also held that, once the royalty (5% of total sales) is regarded as "at arm's length", it would be allowed a…