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2024 (3) TMI 657 - ITAT DELHITP Adjustment - notional interest on outstanding receivables due from Associated Enterprises (AES) - assessee not charging any interest from its AEs - Treatment of outstanding receivables as a separate international transaction - Common policy of not charging interest on delayed payments from AEs and third parties - HELD THAT:- As per explanation (i)(c) of Section 92B of the Income Tax Act as amended by Finance Act, 2012 w.r.e.f. 01.04.2002, the interest receivables is an international transaction. Section 92B(i)(c) reads “capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business.” In CIT Vs. EKL Appliances (2012 (4) TMI 346 - DELHI HIGH COURT] it was held that the delay in receipt of the amounts has to be investigated on case to case basis and examination has to be conducted by the TPO/AO by analyzing the statistics over a period of time and to find out a pattern intended to benefit its AE In the case of Apache Footwear India Pvt. Ltd 2023 (4) TMI 521 - ITAT HYDERABAD] Tribunal concluded that interest on outstanding receivables from the AE is required to be separately benchmarked and interest should be charged on the delayed period @ 6% on the receivables. We also make it clear that interest cannot be charged on each and every receivable and has to be examined on case to case basis and the TPO has to enquire and analyze the statistics over a period of time to discern a pattern to come to a conclusion that the arrangement reflects an international transaction. The AO has to examine the transactions of similar in nature with non-AEs to come to a conclusion to charge interest and also to determine the basis of interest to be charged. We have also examined the order in the case of Orange Business Services India Solutions (P.) Ltd. [2022 (12) TMI 1070 - ITAT DELHI] and also the order of the Tribunal for the earlier years. Each year has to be looked into separately based on the facts of the each case. In this case, the inter company services agreement provides for charging of interest on delay of receivables after 60 days. Hence, we direct that the adjustment on account of receivables be computed after following the directions of the ld. DRP. The AO has considered each and every transaction and arrived at right conclusion to determine the adjustment. While computing so, it is directed that the AO shall set off the receivables cleared by the AEs in less than 30 days or received in advance as ordered by the ld. DRP. These directions are applicable to the year in question as the chargeability on interest receivables varies from year to year. The LIBOR is an internationally recognized rate which is appropriate to benchmark and to determine ALP on receivables. The mark-up decided by the ld. DRP is held to be reasonable. In the result, the appeal of the assessee on this ground is partly allowed.
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