GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 243 - ITAT HYDERABAD

2016 (7) TMI 243 - ITAT HYDERABAD - TMI - Transfer pricing adjustment - Notional interest on sundry debtors - whether the amount advanced is for the purpose of equity or the amounts advanced originally as loans and later converted to equity? - Held that:- AO has to ascertain the nature of advances given to assessee whether it is loan or equity and how they are reflected in the respective accounts in the respective years. If assessee has invested them as investment in subsidiary they would be don .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to the file of AO/TPO to re-examine the facts afresh and then decide the issue accordingly, keeping in mind the provisions and the case law relied upon. Assessee should be given an opportunity to substantiate the contentions. - Decided in favour of assessee for statistical purposes. - Eligibility of claim of deduction u/s 10A - Held that:- As can be seen from the order of the DRP also, it has more or less accepted assessee’s contentions. But while implementing the orders of the DRP, AO did .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Act and relevant case law relied upon. AO is directed to examine all the above issues afresh after giving due opportunity to assessee. - Decided in favour of assessee for statistical purposes. - Interest charged on receivables - Held that:- As seen from assessee’s contentions, assessee is neither charging interest on any of the receivables outstanding. There is also no basis for adopting only two months as credit period. RBI itself allows an year for the amounts to be realised, if they ar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

deration. As far as this year is concerned, the invoices raised on 31-12-2009 were outstanding only for a period of three months by the end of the accounting year. We are of the opinion that this period is reasonable and so no interest can be levied, just because amounts are shown as ‘outstanding’. Accordingly, we cancel the interest levied and allow assessee’s contentions. - I.T.A. No. 497/HYD/2015 - Dated:- 29-4-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT M .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

377; 73,31,22,791/- made during the year of account in its AE, M/s GSS America Inc without appreciating the fact that the shares have been already allotted to the assessee company. 2. Erred in re-categorizing the nature of asset by treating the "Investment" as "Loan" which is not permissible u/s 145 of the Act. 3. Erred in not considering the foreign exchange received of ₹ 5,31,09,900/- within 2.5 months from the end of one year from the date of invoice while calculatin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ancy through branches" of ₹ 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 ₹ 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 ₹ 21,78,647/- on delayed realisation from sundry debtors of ₹ 5,31,09,900/- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re IT enabled services filed its return of income of ₹ 93,433/- under the normal provisions of the Act and MAT income of ₹ 13,82,37,272/-. Since assessee had international transactions with its Associated Enterprise [AE], the matter was referred to the Transfer Pricing [TPO] u/s. 92CA of the Act. The TPO passed an order u/s. 92CA(3) dt. 28-12-2014 making an addition of ₹ 47,25,188/- towards adjustment of Arm s Length Price [ALP]. In addition to the above adjustment on TP provis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ith reference to the deduction u/s. 10A, it has directed the AO to verify every export realization vis-à-vis the date of invoice and also guidelines issued by RBI and re-determine the deduction. It also directed that assessee has filed Form-56F showing the full claim of deduction and AO is directed to verify the same and re-work the deduction u/s. 10A. It was the contention that AO did not follow the directions; hence assessee has raised the grounds accordingly. 3. We have heard Ld. Couns .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as in the nature of quasi-equity and the advances converted into equity in FY. 2011-12 and the facts 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 ₹ 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 subsidiar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eld 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 submission of the Ld. Counsel that company does not have any borrowed funds and has raised zero coupon bonds outside India which were invested for the purpose of equity at zero cost. It was further sub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Vs. Addl. CIT (ITA No. 842/Hyd/2012) and the decision of Hill Country Properties Ltd., Vs. Addl. CIT [48 taxmann.com 94] (Hyderabad-Trib.) Ld. Counsel also relied on the decision of DCIT Vs. Cadila Healthcare Ltd., [39 taxmann.com 51] for the same proposition. It was also contended that investment in subsidiary is not an international transaction as no income is generated. Ld. Counsel relied on the decision of M/s. Vodafone India Services (P.) Ltd., Vs. Union of India [50 taxmann.com 300] (Bom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re unable to give any finding whether the amounts advanced were in the nature of equity or not? TPO order in fact shows that the sums were shown as outstanding and he categorized them as interest free loans. There are also opening balances pertaining to earlier year to an extent of ₹ 43,12,68,000/-. It is not known whether department has accepted the advances in earlier year without any TP adjustment. In the absence of relevant facts, it is difficult to give a finding and apply various cas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 inform .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

upon and the applicable provisions of the Act. Then, the rate of interest would be an issue. In case interest is levyable, then, LIBOR+2% is generally accepted as the rate of interest to be levied on international transactions by various decisions of the Co-ordinate Benches. Therefore, without adjudicating the issue on this, we set aside the matter to the file of AO/TPO to re-examine the facts afresh and then decide the issue accordingly, keeping in mind the provisions and the case law relied u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urnover, profit and exemption u/s. 10A as under: Details of Export Amount in Rs. 1. Export from GSS Infotech Ltd, Hyderabad 20,20,07,311 2. Sales from US Branch 26,79,27,306 3. Sales from Dubai Branch 92,97,063 4. Export turnover 47,92,31,680 5. Domestic Sale 3,39,455 6. Total turnover 47,95,71,135 7. Net Profit 13,19,98,501 8. Exempt Profit 7*4/6 13,19,05,068 5.1. The details of export realization in respect of exports from Hyderabad are furnished as under: Details of Export Amount in Rs. 1. Ex .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

port proceeds in case of companies registered under STPI Scheme. Thereafter, extension after six months is granted by the authorized dealer itself. RBI Circular on export of goods and service bearing No. 9/2009 dt. 01-07-2009 is relied upon. It was submitted that assessee-company realised an amount of ₹ 2,84,51,000/- within the period of one year from the date of invoices. Further, ₹ 5,02,20,605/- was realised within 2½ months from the end of one year from the date of invoices .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 examine these issues. Ld. Counsel relied on vario .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nkhya InfoTech Ltd., ITA No. 316-320/H/2010 Export receivable converted into equity of ₹ 12,23,68,351/- c. Onsite sales should not be excluded from Export Turnover M/s. Zylog systems Ltd Vs. ITO (2011) 128 ITD 105 Onsite Consultancy of Branches of ₹ 27,72,24,369/- Whatever amount has been excluded from the export turnover should also be excluded from the total turnover for the purpose of computation of exemption u/s. 10A of the Act ITO Vs. D E Block India Software Pvt Ltd., ITA No. 9 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ues require examination by the AO in detail and then assessee claim u/s. 10A should be allowed. May be because of lack of time, AO did not implement the directions. Be that as it may, we are convinced that assessee is entitled for various deductions on the basis of the provisions of the Act case law relied and therefore, AO is directed to verify the contentions and allow the same, keeping in mind the provisions of the Act and relevant case law relied upon. AO is directed to examine all the above .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee 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 le .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

charging interest from any other person whether AE or non-AE. Assessee is also not paying any interest amount to anybody. Further referring to the table of the AO in page 7 of the order, it was submitted that most of the invoices were dated 31-12-2009 and the year ends on 31-03-2010. Thus, if at all there is a delay it was only for a month in the impugned accounting year, whereas, AO levied for a period beyond accounting year also which cannot be upheld. 10. Assessee relied on the following case .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version