The issue before the Delhi ITAT was as under:
Whether rate of Royalty/FTS approved by RBI is always at ALP?
The Delhi ITAT held as under:
1) The jurisdictional High Court in case of CIT v. Nestle India Ltd.  11 taxmann.com 106 made following observation:
‘The Tribunal is not correct in observing that since the permission is given by the RBI, the reasonableness and genuineness of the expenditure could not have been gone into by the AO. The purpose for which such permission is given by the RBI is totally di erent. The RBI is only concerned with the foreign exchange and, therefore, would look into the matter from that point of view. The RBI, at the time of giving such permission would not keep in mind the provisions of the IT Act and that is the function of the IT authorities and, therefore, they can validly go into such an issue'
2) It is explicitly clear from the enunciation of law by the Delhi High Court that the grant of permission by the RBI to payment of royalty is not sacrosanct for the purposes of the Act and, can be examined by the Assessing O icer to ascertain its excessiveness.