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2022 (12) TMI 799 - AT - Income TaxTP Adjustment - upward adjustment in imputing notional interest on the outstanding overdue receivables from Associated Enterprises (AEs) - AR submitted that the assessee has adopted Transaction Net Margin Method (TNMM) and therefore the interest on outstanding receivables is subsumed in the Arm’s Length Price (ALP) charged to the AEs - HELD THAT:- As find from working of assessee’s own case for the A.Y.2017-18 [2022 (9) TMI 587 - ITAT VISAKHAPATNAM] the assessee’s margin is significantly higher than the operating margin of the comparable companies. There may be a delay in the collection of receivables even beyond the agreed time limits due to a variety of factors which has to be decided on a case to case basis. When TNM method is considered as the most appropriate method, which was also not disputed by Revenue, the net margin thereunder would take care of such notional interest cost. As further explained by Ld.AR that the impact of the delay in collection of receivables would have a bearing on the working capital of the assessee. We find that these working capital adjustments on the ALP has been already factored in its pricing / profitability vis-à-vis that of its comparables. We therefore are of the considered view that any further adjustment to the margin of the assessee on the outstanding receivables cannot be justified and no separate upward adjustment on outstanding export receivables is required and therefore we direct the AO to delete the upward adjustment made towards overdue receivables from AE. We therefore allow this ground raised by the assessee. Adjustment towards corporate guarantee - Addition of commission on the gross guarantee given to AE - HELD THAT:- As relying on assessee own case [2022 (9) TMI 587 - ITAT VISAKHAPATNAM] following the ratio laid down in the case of CIT vs. Everest Kanto Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT]. We are of the considered view that the corporate guarantee commission is an international transaction and should be charged @ 0.50% on the corporate guarantee amount utilized, by the AE. We therefore allow the grounds raised by the assessee. Disallowance under section 14A r.w.r. 8D - As argued the assessee has not earned any exempt income warranting the disallowance u/s. 14A - AR pleaded that the assessee’s holding shares is merely to retain the controlling interest and no income has been received by the assessee during the impugned assessment year - HELD THAT:- As relying on assessee own case [2022 (9) TMI 587 - ITAT VISAKHAPATNAM] assessee has not earned any exempt income during the relevant assessment year mandating the invoking of provisions of section 14A - As in CIT vs. Chettinad Logistics (P.) Ltd [2017 (4) TMI 298 - MADRAS HIGH COURT] has dismissed the SLP [2018 (7) TMI 567 - SC ORDER] of the Revenue and held that section 14A can only be triggered if assessee claims any expenditure against an income which does not form part of the total income under the Act. The Hon’ble Supreme Court further observed that Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income which does not form part of the total income of the assessee. - Decided in favour of assessee.
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