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TMI Blog2016 (7) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... /- within 2.5 months from the end of one year from the date of invoice while calculating deduction u/s 1OA without appreciating the fact that the authorised dealer, the AXIS Bank has certified and confirmed that the amount of Rs. 5,31,09,900/- has been received by the assessee. 4. Erred in not considering the export receivable from its subsidiary of Rs. 12,23,68,351/- converted into equity while calculating deduction u/s.10A and the same is carried out as permitted by RBI in Master Circular No. 05/2010 dated July 1,2010. 5. Ought to have considered the "Onsite Consultancy through branches" of Rs. 27,72,24,369/- as foreign exchange received as per explanation 3 to Section 10A of the Act. 6. Erred in deducting "0nsite Consultancy through branches" of Rs. 27,72,24,369/- from the 'Export turnover' without deducting the same from the 'Total turnover' for computing the deduction u/s.10A of the Act. 7. Erred in charging notional interest of Rs. 21,78,647/- on delayed realisation from sundry debtors of Rs. 5,31,09,900/- without appreciating the fact that the assessee is not charging interest irrespective of the debtor being an "Associated Enterprise" or "Non-Associated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are similar to the decision of the ITAT in the case of Mascan Global Limited in ITA No. 2205/10 dt. 12-08-2011. The TPO however, did not accept and determined the interest at 4.06% pa and worked out the levy of interest of Rs. 47,25,188/-. 4.1. Before the DRP, assessee submitted that most of the business of assessee is from the US region and the advances were given to the assessee's subsidiary for the purpose of overall growth of business of the group. It was submitted that amounts were given in the nature of quasi-equity and assessee has not borrowed any funds and there was NIL interest payment. It was further submitted that even the WOS does not have any loans from any third parties and so no interest rate could be bench marked. It was further submitted that there is no need for levy of interest as the amounts advanced were converted to equity. The DRP however, did not agree and held that these amounts were in the nature of loans and advances to AE and these transactions are clearly international transactions which require adjustment under the transfer pricing provisions. It upheld the decision of TPO not only in charging interest but also rate of interest. 4.2. It was the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how they are reflected in the respective accounts in the respective years. If assessee has invested them as investment in subsidiary they would be done under the head 'investment' otherwise, the same would figure under the head 'loans and advances'. Likewise, if the amount is advanced as the share capital, the same would also be shown as share application money in the subsidiary hands. These require factual verification. It is also required to verify whether the funds provider or from Zero coupon bonds subscribed abroad or funds from India and necessary approvals from RBI, SEBI, Company Law Board and other statutory authorities governing these funds and finances. Consequently, AO is directed to examine assessee's statements of accounts and also the necessary resolutions passed and information furnished to authorities to establish the nature of amounts advanced. If the amount is advanced towards loans, then, the transaction would be an international transaction and whether interest can be levied or not has to be examined in the light of the various decisions relied upon. What we also notice is that many of the decisions are not in the context of TP provisions but in the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was submitted that assessee-company realised an amount of Rs. 2,84,51,000/- within the period of one year from the date of invoices. Further, Rs. 5,02,20,605/- was realised within 2½ months from the end of one year from the date of invoices. Assessee relied upon the provisions of Section 155(11A) for benefit under this extended period of time. It was further submitted that an amount of Rs. 12,23,68,351/- was converted into equity with the necessary permission from FEMA and RBI. This is in tune with the master circular and also permitted by RBI, therefore, export receivables to that extent are deemed to have been received. Accordingly, Rs. 12,23,68,351/- is also eligible for deduction u/s. 10A. 5.3. The Fourth item in this is 'on-site consultancy' through the branches for which assessee relied upon Explanation 3 and sub-section-I of Section 10A which are deemed to be the profits and gains as per the provisions. It was the contention that profits and gains derived from on-site branches also would be considered as deemed profits for the purpose of export of computer software outside India. We were also informed that in spite of clear directions from the DRP, AO did not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated receipts of Rs. 5,31,09,900/-. Assessee objected to the same stating that assessee accords credit for a period of twelve months on its receivables to its AE and non-AE. It was submitted that assessee does not charge any interest on any delayed payments irrespective of whether other party was AE or not. Since there is no policy of levying interest, question of levy of interest applying either CUP method or any other method does not arise. It was submitted that assessee is a debt free company and there is no interest burden on it. It was submitted that when assessee's transactions are analysed under TNMM under which International transactions were accepted as at arms length, further levy of interest does arise. Assessee placed reliance on various case law as listed in page 12 of the DRP's order. However, the DRP did not accept the contentions but directed the AO to charge interest at 4.06% on the belated payments of the receivables beyond two months. AO accordingly levied interest of Rs. 21,78,647/- calculating the delay of 12 to 13 months on five transactions. 9. It was the submission of assessee that first of all, there cannot be any levy of interest as assessee is not char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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