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2022 (11) TMI 201 - AT - Income TaxTP Adjustment - Adjustment on account of outstanding receivables from its associated enterprise (“AE”) - HELD THAT:- We find that average line rate charged by the assessee to its AE is higher than the rate charged by the third-party vendors to the AE even after including the foreign currency loan interest of LIBOR + 3.25% to it and considering credit period of 45 days (as per its agreement with the AE). By applying the similar methodology and adopting the interest as calculated by the TPO, i.e. average 6 months USD LIBOR plus 450 basis points, we find that even in this scenario also average line rate charged by the assessee to its AE is higher than the rate charged by the third-party vendors to the AE even after including the imputed interest cost to it. We find merits in the submissions of the assessee and are of considered view that average line rate charged by the assessee to its AE in respect of provision of medical transcription services is at arm’s length vis-à-vis comparable interest cost adjusted rate charged by the third-party vendors to the AE and thus no further adjustment, as made by TPO/AO and upheld by the learned DRP, is warranted. Accordingly, we direct the TPO/AO to delete the adjustment on account of outstanding receivables in respect of provision of medical transcription services. The transaction pertaining to provision of IT and IT enabled services was benchmarked by the assessee by adopting TNMM and margin of the assessee was found to be at arm’s length vis-à-vis working capital adjusted margins of the comparables. From the record, it is evident that the TPO has also, inter-alia, accepted the benchmarking analysis conducted by the assessee in respect of transaction pertaining to provision of IT and IT enabled services. The plea of the assessee is that aforesaid benchmarking has already considered the impact of delayed receivables and thus no further adjustment on account of outstanding receivables is required. Thus, respectfully following the aforesaid decision of Hon’ble Delhi High Court in Kusum Healthcare (P) Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT] we find no merit in the adjustment made by the TPO/AO on account of outstanding receivables in respect of transaction pertaining to provision of IT and IT enabled services, when margin of assessee was found to be at arm’s length vis-à-vis working capital adjusted margin of comparables. Accordingly, we direct the TPO/AO to delete the adjustment. - Decided in favour of assessee.
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