TMI Blog2012 (2) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... but not a separate transaction in itself. No adjustment is warranted. Further, relevant consideration is the taxation of the enterprises of the group that are chargeable to tax in India. If the concept of over all higher or lower rate/amount of tax in the other countries in which AEs are situated is taken into consideration, then Chapter-X of the Income-tax Act would become meaningless. - IT Appeal No. 5872 (Mum.) of 2009 - - - Dated:- 22-2-2012 - R.S. Syal, N.V. Vasudevan, JJ. ORDER R.S. Syal, Accountant Member This appeal by the Revenue arises out of the order passed by the Commissioner of Income-tax (Appeals) on 31.08.2009, in relation to the assessment year 2005-06. 2. Ground nos.1 and 2 deal with the deletion of addition of Rs. 49,99,680 on account of adjustment made to arm's length price (ALP) in respect of international transaction with Associated Enterprise (AEs). Briefly stated the facts of these grounds are that the assessee entered into international transactions with its AEs and others, as depicted on pages 1 and 2 of the TPO's order dated 30.10.2008. The assessee followed TNMM for determining arm's length price. In this way it showed operating prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Representative contended that in the preceding year the profit margins were different in respect of sales to AEs and non-AEs. He, therefore, urged that the distinct operating profit margin to cost in the preceding year qua the AEs and non-AEs should not be applied to the ratio of operating profit to cost in the current year on a combined basis. 5. There is no dispute that we are concerned only with the operating profit margin in relation to the international transactions with the AEs. But the contention put for the by the ld. DR is not acceptable on merits for the reason that in the preceding year the net profit margin to sales was at 5.38% to AEs and 1.77% to non-AEs with aggregate operating profit margin to sales at 3.56%. On the contrary in the current year the combined operating profit margin from both AEs and non-AEs is at 5.78%. Since the segmental accounts have been stated to be not maintained in respect of transactions with AEs and non-AEs, and further, neither the TPO has made any calculation nor the ld DR has placed any material on record to indicate that the profit margin on transactions with AEs for the current year is lower than the combined, we cannot accept the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) ordered for the deletion of this addition. 7. Having heard the rival submissions and perused the relevant material on record it is observed from para 5.3 of the impugned order that the total debtors amounted to Rs. 8,73,64,611 which included non-AEs debtors at Rs. 3,62,21,427. It is an admitted position, as recorded by the TPO himself, that the assessee allowed credit period of 180 days to its AEs. Page 109 of the paper book is the detail of outstanding debtors with bifurcation into AEs and non-AEs giving invoice number, credit period, amount outstanding and number of days outstanding from the date of invoice. When we peruse the details in respect of outstanding balance from AEs, it can be observed that the as against the credit period of 180 days, the number of days for which the balances remained outstanding ranges from 13 to 353. Even if, for a moment, we accept the contention of the learned Departmental Representative that since there was a delay in the realization of amount from debtors beyond 180 days and hence interest should have been charged, still the period of delay beyond 180 days in certain cases would neutralize the early recoveries from the AEs in ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustment. One may also contend that the expression 'any other transaction having a bearing on the profits, income, losses .' as employed in sec. 92B defining international transaction would encompass such interest from sale as the non-receipt of due interest would have the effect on profits or income. This contention also does not merit acceptance because when 'sale' and 'lending money' have been specifically included in definition of 'international transaction' u/s 92B, then the expression 'any other transaction' used in the later part of this provision will exclude all the items separately covered. In this view of the matter, it becomes manifest that there can be no separate international transaction of interest income which is part of the transaction of sale. Once ALP is determined in respect of the sale transaction, it would be deemed to be covering all the elements and consequences of the transaction of sale. Having determined ALP in a sale transaction, it cannot be accepted that separate adjustment de hors such determination is required in respect of interest. 9. Reverting to the facts of the case, it is noticed that while disposing of ground nos. 1 and 2 of the Revenue's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be seen from page 109 of the paper book, which gives details of outstanding debtors with the credit period allowed and the actual age of the debtors in respect of both AEs and non-AEs that apart from the late realization of debtors from AEs, there is delay in realizing debtors from non-AEs. Such period of non-realization in case of non-AEs is also ranging upto 352 days. It has not been shown that the assessee has charged any interest from non-AEs debtors in respect of delayed realization. It, therefore, proves that there is complete uniformity in the act of the assessee in not charging interest from both the AE and non-AE debtors for almost equal delay in the realization. 11. Even if we accept the contention of the ld. DR that the non-charging of interest from AEs in the transaction of sale could in itself be construed as an international transaction, then also going by the CUP method, no such adjustment can be made because the assessee is not avoiding any tax by intentionally not charging any interest from the AEs but charging it from non- AEs. As the case of non-charging of interest in the controlled transactions is comparable with that of non-charging from the uncontrolled tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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