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2022 (5) TMI 1447 - AT - Income TaxTP adjustment - determination of Arm's Length Price in respect of an international transaction u/s. 92 of rendering of SWD services to AE - comparability of international transaction with a transaction of similar nature entered into between unrelated parties - HELD THAT:- We hold that companies listed in Sl. No. (a) to (g) raised by the Assessee whose turnover in the current year is more than Rs. 200 Crores should be excluded from the list of comparable companies. The argument that the Assessee himself chose 10 times turnover as criteria in its TP study is no ground to reject the plea of the Assessee, as it is well settled that tax liability has to be determined in accordance with law and not on admission of parties. There is no principle of estoppel that applies in determining tax liability. Therefore, we are of the view that the argument of the learned DR that the criteria of 10 times the turnover of the Assessee has to be applied in the present case, cannot be accepted. The TPO/AO is directed to compute the ALP of the international transaction of rendering of SWD services by the Assessee to AE in the light of the directions given above, after affording Assessee opportunity of being heard. 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:- We are of the view that the TPO/AO have erred in not giving effect to the direction of the DRP based on invoice wise delay in receipt of outstanding. Instead the TPO/AO proceeded on estimation basis by considering the average of opening and closing debtors balances and computed interest for the whole year on this average balance receivable after treating it as a loan, after reducing the allowed credit period of 180 days from 365 days and has charged interest on the estimated average balance as explained above for an assumed delay of 185 days - as per contract with the holding company for providing software development services the credit period agreed is 180 days. And thus interest on delay if any, may be charged on invoice wise receipt exceeding the agreed credit period of 180 days. Since there is no delay whatsoever in realization of receivables, there was no question of attributing notion interest on delayed receivables and making any addition. Since the above facts with regard to realization of receivables from the AE not having been considered despite the details having been furnished to the TPO, we deem it fit and proper to verify the details by the TPO/AO. In the light of the above submissions, we set aside the order of the AO and the directions of the DRP and remand the issue to the TPO/AO for consideration afresh to decide whether there was at all delay in realizing receivables from the AE over and above the credit period of 180 days and if there was no such delay then there can be no international transaction at all in this regard and consequently there cannot be any determination of ALP. The TPO/AO will afford opportunity of being heard to the Assessee before deciding the issue. Appeal by the Assessee is partly allowed.
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