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2018 (4) TMI 926 - ITAT DELHITransfer Pricing Adjustment - re-characterizing of the outstanding receivables from overseas AEs as loan facility - imputing interest at the rate equal to annual average yield of 5 year ‘BB’ rated bond by considering all the receivables to be outstanding for over 365 days - account of receivables due to the assessee from its assessee for the services rendered - Held that:- It is seen that in the case of unrelated party transaction, there are huge delays and in some cases it has gone up more than 1700 days. The period of outstanding receivables is ranging between 38 days to 1718 days and in most of the invoices, average delay is more that 300 days. If there are similar nature of transaction with comparable uncontrolled transactions and also with related parties, then there is an internal CUP to bench mark the controlled transaction with comparable uncontrolled transaction. Under CUP price charged or paid for the services provided in a comparable uncontrolled transaction is taken into consideration and it is the adjusted price paid for availing services which constitutes the benchmark for comparison with the price paid for availing of any services in an international transaction. If there are similar transactions of services with related parties as well as unrelated parties and the price charged or paid are comparable, then it is taken to be at arm’s length price. Thus, if under both the scenarios, no interest has been charged on similar nature of receivables, then it has to be reckoned that the transaction with the related party meets the arm’s length requirement vis-à-vis, the transactions with the unrelated third parties. Accordingly, we hold that no interest can be imputed on receivables with the AE and accordingly, the addition made by the TPO is directed to be deleted. - Decided in favour of assessee.
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