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2019 (1) TMI 1598 - AT - Income TaxTP Adjustment - arm’s length price of interest on receivables and the shortfall - Adjustment on credit period beyond 90 days - no credit period was agreed between the parties - HELD THAT:- TPO has made the independent TP analysis and found that the tax payers margins are within +/- 3% variation of the comparable companies and has not made any working capital adjustment. However, noticed that assessee has huge outstanding in receivables and made adjustment on interest receivable on such outstandings. We noticed that TPO has allowed the credit period at 90 days as per agreement and wherever assessee allowed the credit period beyond 90 days, he made the adjustment. TPO has made the adjustment wherever assessee has allowed the credit period beyond 90 days and failed to acknowledge that assessee has received certain payment within 90 days also. We are in agreement with ld. AR that we need to consider the overall average credit period for the AY or should be compared with the industry average. TPO has applied 90 days period selectively. Therefore, in our view, TPO should calculate the average of collection for the year under consideration of all the transactions carried on by the assessee. In case, it is found that such collection period is beyond 90 days, he can do the adjustment only to the extent it crossed 90 days. TPO cannot calculate the collection period selectively for those which are beyond 90 days. Therefore, we remit this issue back to the TPO to calculate the average collection period for this AY and determine the adjustment as per the above directions. Accordingly, the grounds raised by the assessee on this issue are treated as allowed for statistical purposes.
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