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2020 (10) TMI 190 - AT - Income TaxTP Adjustment - Interest on outstanding receivable from AE - HELD THAT:- When we examine audited profit and loss account it shows that taxpayer is a debt free entity. It is settled principle of law that when taxpayer is debt free company there is no question of receiving any interest on the receivables. Perusal of TP study of the taxpayer shows working capital adjustment has been granted to the taxpayer in the year under assessment as well as in the earlier years. When undisputedly impact of working capital of tested party vis-à-vis its comparables has been factored in the profitability of the taxpayer while benchmarking international transaction qua IT and ITES segments have been held to be at arm’s length, then there is no need to impute the interest on outstanding receivables from associated enterprises (AE). Coordinate bench of tribunal in case of M/s. Target Sourcing Services India Pvt. Ltd. [2020 (1) TMI 127 - ITAT DELHI] following the decision rendered in case of Pr. CIT vs. Kusum Health Care Pvt. Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT] held that re-characterization of outstanding receivables as loan by the TPO and thereby imputing the interest on such outstanding receivables is not sustainable in the eyes of law Addition made by TPO/DRP on account of interest on outstanding receivable from AE is not sustainable, hence, order to be deleted. - Decided in favour of assessee. Deduction u/s 10AA on account of interest income and miscellaneous income - addition on the ground that the said income cannot be set to have any direct nexus with the assessee business because the assessee is not into the business of finance and investment - HELD THAT:- As relying on own case [2018 (2) TMI 1084 - ITAT DELHI] we are of the considered view that the taxpayer is entitled for deduction u/s 10A on the interest earned on the fixed income and miscellaneous income as Section 10A is a complete code providing the mechanism for computing profit of the business eligible for deduction and as such taxpayer is held to be entitled for deduction u/s 10AA. Approach adopted by AO/DRP is legally and factually misconceived that order of Tribunal has not yet attained finality, more particularly when order passed by Tribunal has not been stayed by the higher forum. - Decided in favour of assessee.
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