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2022 (1) TMI 1320 - AT - Income TaxTP adjustment - assessment on account of notional interest on outstanding payments of receivables from associated enterprises (AE) - HELD THAT:- Sole adjustment proposed by the TPO is with regard to the outstanding receivables on the delayed payment beyond 15 days from its AE holding it to be in the nature of un-secured loan and thereby proposing adjustment of Rs.46,07,661/- for assessment year 2012-13, wherein the AO has taken SBI PLR rate of 12.60%; whereas in assessment year 2013-14 the Assessing Officer has made adjustmen by taking average LIBOR rate plus 400 basis point which was arrived at 4.37% treating it to be separate international transaction. Also an un-disputed fact that before the authorities below the assessee had submitted the working capital adjustment vis-à-vis the comparable companies before the TPO / AO which if factored into then no adjustment on account of receivables form AE is required. This working capital adjustment has not been accepted. If the working capital adjustment is accepted, then the differential impact of working capital of the Assessee vis-à-vis the comparables stands already factored in the pricing/profitability, which herein this appears to have been done and it has been stated that the working capital adjusted margin of the comparables is around 4% whereas assessee’s margin is around 9% and thus, no further adjustment is required. Before the AO the assessee has up-dated the comparable companies and has filed the working capital adjustment margin which was in response to the show cause notice. From the perusal of the working it is seen that, in assessment year 2012-13 the working capital adjusted on the comparable company was arrived at 4.50% of net profit operating margin as against the net operating margin earned by the assessee at 9.36% and in the assessment year 2013-14, the working capital adjustment of the comparable companies was arrived at 4.02%, whereas the net operating margin earned by the assessee was at 9% which is much higher than adjusted margin earned by the comparable companies. Though we find that in the assessment year 2011-12 the Tribunal has confirmed the said adjustment due to lack of any such computation filed by the assessee at any stage. However, in this year it is already part of the record. Therefore, we direct the TPO to examine the working capital adjustment and if the working given by the assessee is found to be correct then in the light of the decision of the Hon’ble jurisdictional High Court in the case of Pr. CIT Vs. Kusum Healthcare Private Limited [2017 (4) TMI 1254 - DELHI HIGH COURT ] no adjustment should be made on the proposed notional interest on the outstanding receivables. With this direction the appeal of the assessee is treated as partly allowed for statistical purposes.
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