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2017 (3) TMI 479 - AT - Income TaxTransfer Pricing (T.P) adjustments - notional interest on receivables from Associated Enterprises (A.E) - TPO jurisdiction - Held that:- In the present case, the assessee parked a huge amount of funds for a longer period with its AE. It was only because the pricing of international taxation has been accepted for ALP test, it is not possible to hold that the TPO should not go into this question of parking of huge funds with its AE. If the funds are repatriated to India, the assessee would have been in a position to earn better profit from appropriate investment of those repatriated funds. This potential loss is definitely a factor to be considered while evaluating the financial impact of the international taxation concluded by the assessee with its AE. Therefore, in our opinion, it is required to keep the TP adjustments towards notional interest on receivables. The purpose of TP adjustments is in the larger context of anti-evasion measures. The outstanding balance of the receivables from the AE did not generate out of domestic transactions. Those receivables did generate from international transactions carried on by the assessee with its AE outside India. Therefore, there is no basis for argument that no adjustment could be made towards notional interest or receivables from AE. The outstanding receivables from AE is financial result of international transactions concluded by the assessee and therefore, the income effect arising, if any, to that outstanding receivables is very much relevant aspect of ALP. Therefore, the TPO is having the jurisdiction to examine the issue of outstanding receivables or non-charging interest thereon. As in the present case, the credit period extend by the assessee to its AE is very longer period, sometime it is more than one year the contention of assessee that there can be no separate transfer pricing adjustments towards notional interest on outstanding receivables rejected.- Decided against assessee
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