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2021 (10) TMI 1351 - AT - Income TaxTP Adjustment - comparable selection - application of turnover filter - HELD THAT:- Companies functionally comparable cannot be excluded only on the basis of high turnover - Companies whose turnover in the current year is more than ₹ 200 Crores should be excluded from the list of comparable companies - RPT filter has to be applied adopting the threshold limit of 15%.Companies functionally dissimilar with that of assessee need to be deselected. Merely pointing out that there is a substantial increase in value of intangible assets, the Assessee cannot seek to exclude company from the list of comparable companies, unless the Assessee is able to show that the presence of intangibles is owing to factors which can affect the functional comparability of company with the Assessee. ALP determination - as per assessee international transaction in question would be at Arm's length when benchmarked with its transaction with unrelated parties on the basis of the internal TNMM - HELD THAT:- We find that this issue has been raised by the Assessee for the first time before the Tribunal. The Revenue authorities did not have any occasion to examine this issue and therefore we deem it fit and proper to remand this issue to the AO/TPO for consideration afresh and in the light of the relevant applicable statutory provisions. Determination of ALP by construing the delayed realization of receivable by the Assessee from its AE as a separate international transaction and determining ALP of such delayed receivables - HELD THAT:- Non-charging or under- charging of interest on the excess period of credit allowed to the AE, for the realization of invoices amounts to an international transaction and the ALP of such an international transaction is required to be determined. In view of the above observations. the reliance placed by the ld. counsel for the assessee on earlier decisions cannot be accepted. Similarly, Considering the above discussion, it is held that deferred trade receivable constitutes international transaction. Having concluded that deferred trade receivables constitute international transaction, we come to the computation of the ALP of the international transaction of 'debt arising during the course of business.' This has two ingredients, viz., the amount on which interest should be charged and the arm's length rate at which the interest should be charged. We are of the view that the issue with regard to determination of ALP in respect of the international transaction of giving extended credit period for receivables should be directed to be examined afresh by the AO/TPO on the guidelines laid down in the decision referred to in the earlier paragraph, after affording Assessee opportunity of being heard. As held in the aforesaid decision the prime lending rate should not be considered and this reasoning will apply to adopting short term deposit interest rate offered by State Bank of India (SBI) also. The rate of interest would be on the basis of the currency in which the loan is to be repaid. We hold and direct accordingly. All issues on determination of ALP of the transaction are kept open. Appeal by the Assessee is partly allowed.
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