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2022 (8) TMI 1428 - ITAT BANGALORETP Adjustment - Comparable selection - Infosys BPO Limited (Exclusion) - HELD THAT:- The Bangalore Bench of the ITAT in the case of M/s.Fulcrum Fund Services (India) Private Limited [2019 (4) TMI 2095 - ITAT BANGALORE] has directed exclusion of this comparable for the assessment year in question. Thus we direct to exclude this company from the list of comparable companies. Microland Limited (Exclusion) - The Bangalore Bench of the ITAT in case of M/s.Brady Company India (P) Ltd. (supra) had excluded Microland Limited from the list of comparables on functional incompatibility with ITES segment. The profile of the assessee in the instant case and profile of the assessee in case of M/s.Brady Company India (P.) Ltd. are similar, thus we direct the TPO to exclude Microland Limited as comparable. Accordingly, the appeal of the assessee is allowed on this ground. Crossdomain Solutions Private Limited (Exclusion) - The Bangalore Bench of the Tribunal in the case of M/s.Vee Technologies Private Limited v. PCIT [2022 (3) TMI 1533 - ITAT BANGALORE] had excluded the above company from the comparable list on account of functional incompatibility - we direct the TPO to exclude Crossdomain Solutions Pvt. Ltd. from the comparable list. Accordingly, the appeal of the assessee is allowed on this ground. Jindal Intellicom Private Limited (Inclusion) -The Bangalore Bench of the Tribunal in the case of M/s.Brady Company India (P) Ltd. [2022 (3) TMI 1528 - ITAT BANGALORE] had held Jindal Intellicom Private Limited is comparable company to ITES segment. Thus we direct the TPO to include Jindal Intellicom Limited in the list of comparables. Accordingly, the appeal of the assessee is allowed on this ground. Interest on delayed receivables - Tribunal has considered only the receivables as may be due beyond the credit period allowed under the agreement between the assessee and its AE as an international transaction, we are of the considered opinion that the same is a tainted transaction and therefore cannot be considered as a benchmark. We find merit in the submission of the learned DR that the period mentioned in the agreement between the assessee and AE should not be considered for the purpose of benchmarking and even to determine whether trade receivable constitutes an international transaction. The very purpose of undertaking benchmarking exercise is to compare the tainted transaction, i.e., the transaction between two related parties / AEs, with that of transactions that are carried out by independent parties on arm’s length basis. If we consider the period allowed in the agreement to benchmark the transaction which is also the subject matter of the same agreement, it will lead to absurd results. We accordingly direct the AO / TPO to determine the credit period allowed by the comparable companies and treat only such trade receivables that are outstanding beyond the arm’s length credit period, as international transactions. Once the above exercise has been done, we direct computation of interest for the delayed realization of trade receivable over and above the arm’s length credit period till the date of its realization or the financial year end, whichever is earlier. TP adjustment on interest on outstanding receivables - With respect to the mark-up that has been charged over and above LIBOR, it is well accepted that such arbitrary numbers cannot be adopted without it being backed by a benchmarking exercise, which is a mandate of the law. We note from the TP order that benchmarking has been undertaken to find ALP rate i.e. 300 basis points has been considered as mark-up and the same represents ceiling rate on ECB and Trade Credits as per RBI Circular. AR is seeking consideration of 2% benchmark merely on the basis of the rulings cited during the course of hearing and no benchmarking exercise has been carried on by the assessee. The ruling in the case of CIT v. Aurionpro Solutions Ltd. [2017 (6) TMI 1087 - BOMBAY HIGH COURT] has been rendered for assessment year 2007- 2008 and the mark-up have been arrived considering the facts relevant to that assessment year. Hence, the same cannot be considered relevant to the assessment year in question as seven years have elapsed. Given the variability of interest rate on a time-to-time basis and in the interest of natural justice, we direct the TPO to provide a fresh opportunity to the assessee to justify 2% mark-up and determine the appropriate mark-up to be charged over and above the LIBOR rate. It is ordered accordingly. In the result, ground is allowed for statistical purposes.
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