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2019 (8) TMI 606 - ITAT DELHITP adjustment - assessee had adopted TNMM for determining theALP for principal amount of exports to AE, same was also accepted by AO - separate benchmarking of notional interest on the outstanding receivables - HELD THAT:- Assessee had adopted TNMM method for determining the arm’s length price for principal amount of exports to AE and it was duly accepted by the TPO. No adjustment under section 92 CA of the Act was suggested in respect of the price for their exports to AE. TPO had taken the notional interest on the outstanding receivables as a separate international transaction and suggested for the adjustment, which the assessee has been assisting basing on the decision of Kusum HealthcarePvt.Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT] It is the settled principle of law, after the decision of Kusum Healthcare Pvt.Ltd. (supra), that in TNMM, the net margin earned was exposed with appropriate working capital adjustment to comparable companies; that the receivable mentioned in the Explanation to Sec.92B can be taken up for transfer pricing scrutiny only when it is a standalone activity or a demonstrated approach is adopted by the assessee to use Accounts Receivable to have free working capital funding; and that if the impact of extended credit period on working capital was factored in the pricing / profitability, then there is no tax leakage or evasive tactics adopted by the taxpayer while transacting with the AE. With this view of the matter, we find it difficult to countenance the argument that, had the funds been received in time and deployed would have earned interest income, which would have been relevant only when the original transaction of sale or services provided to the AE was benchmarked under CUP method. We are of the considered opinion that, if the impact of extended credit period on working capital was factored in the pricing / profitability, then any credit period allowed to AE gets subsumed in TNMM and there is no tax leakage or evasive tactics adopted by the taxpayer while transacting with the AE, and there is no need for a separate benchmarking. - Decided in favour of assessee.
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