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2023 (10) TMI 457 - AT - Income TaxTP Adjustment - Interest on trade receivables - trade receivables outstanding by the assessee from it’s Associated Enterprise - as contented that assessee has a trade outstanding payable to its AE which is higher than the trade outstanding receivables from it’s AE and lower authorities have applied SBI short term deposit rate for short term fixed deposits’ interest to bench mark and compensate the interest to the assessee for the outstanding due - whether the Libor + 200 basic points are required to be applied? - HELD THAT:- The assessee has supplied the services to it’s AE and the AE is due to make the payment for the services / goods received by it to the assessee. Assuming, the assessee gives the same kind of services to the third party, then the assessee would charge interest from the third party. Moreover, if the advances were given by a person, then the prices of the product would be less as the assessee would have availability of funds at disposal for the purpose of carrying out its activities. Because of withholding of funds in case of outstanding receivables, there would be deficit of funds and would be required to borrow the funds to carry out day-to-day activities, albeit those funds would be available to the assessee at the prevailing rate of interest in India. Hence, the SBI short term rate would be the appropriate rate for the purpose of determining the ALP on the outstanding amount. Now, in light of the above, we do not find any reason to take a contrary view as we have taken in the case of Apachi Footware India Private Limited (2023 (4) TMI 521 - ITAT HYDERABAD). As submitted that the AO has not been given any grace period for making the payment - We notice that in AO’s order, it is mentioned that the assessee has failed to provide any service agreement / invoice to the Assessing Officer. Therefore, in the absence of any such contemporaneous evidence showing the grace period, the Assessing Officer has granted 30 days. In our view, the normal trend to be followed is 30 days. However, in the case of Apache Apache Footware India Private Limited (supra), based on the agreement, we have accepted it to 60 days. In the present case, there was no agreement provided by the assessee to show that there was an agreement between the assessee and its AE wherein the time for making the payment was provided as 30 days. In our view, the Assessing Officer is right for granting 30 days as a grace period and beyond that the Assessing Officer / lower authorities have held that the assessee is liable to pay the interest as outstanding amount for the said period. In the light of the above, we do not find any reasons to interfere with the order of TPO. Thus, the appeal of the assessee is dismissed.
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