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2020 (1) TMI 127 - AT - Income TaxTP Adjustment - delayed payment of outstanding receivables from AE - working capital adjustments - HELD THAT:- Undisputedly impact of working capital of tested party vis-a-vis its comparables has been factored in the profitability of the taxpayer which is otherwise less than working capital adjusted of margin of comparable, there is no need to impute the interest on outstanding receivables from AE. When assessee is a debt free company imputation of interest on account of blocked funds that is delay in making payment of outstanding receivables from AE is not warranted. Moreover, when undisputedly the taxpayer has earned higher operating profit to operating cost (OP/OC), margin as compared to comparable companies further proposed addition falls within +/- 3% range allowed under the Indian Transfer Pricing Regulation. As relying on KUSUM HEALTH CARE PVT. LTD. [2017 (4) TMI 1254 - DELHI HIGH COURT] we are of the considered view that when the taxpayer has already taken into account the impact of outstanding receivables on profitability while making working capital adjustments of the taxpayer vis-a-vis its comparables which is less than the working capital adjusted margin of the comparables any further adjustment on account of delayed payment of outstanding receivables from AE would distort the entire picture of re-characterization the transactions. In other words, transactions as to outstanding receivables cannot be re-characterized as loan deemed to be advanced by the taxpayer to its AE. We are of the considered view that AO/DRP have erred in making addition on account of interest on outstanding receivables from AE, hence ordered to be deleted. - Decided in favour of assessee.
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