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Transfer Pricing - Interest on Excess Credit Period/ Delayed Payment

Income Tax - Direct Tax Code - DTC - By: - CA Rohit Gupta - Dated:- 5-9-2016 - Transfer Pricing Adjustment- as an International Transaction The treatment of extended credit period to Associated Enterprises(AEs) as an international transaction and making adjustment of notional interest on the same has always been bone of contention between the assessee and department. In a recent case of Tally Solutions Pvt. Ltd. Vs. ACIT (I.T.(T.P) A. No.1364/Bang/2011) as reported in [ 2016 (8) TMI 774 - ITAT B .....

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ai, UAE and applied TNMM method. The TPO accepted the price charged by the assessee for rendering software development services to its AE at arm s length. However, in respect of significant debts outstanding from its AE, the TPO treated the extended credit facility similar to interest free working capital loan to its AE and determined arm s length interest @14% per annum applying CUP method DRP confirmed the order of AO/TPO. Aggrieved assessee preferred appeal before ITAT. Decision by ITAT ITAT .....

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chapter X were applicable not only in in the case where the assessee was charging or receiving the price under the international transaction but also where assessee was having international transaction with the AE by not charging any price or receiving any price ITAT relying on ITAT rulings in Goldstar Jewellery Ltd. (ITA No.6570/Mum/2012 Dt.14.1.2015) [ 2015 (2) TMI 58 - ITAT MUMBAI ], Avnet India P. Ltd. (IT(TP)A No.757/Bang/2011 Dt.18.11.2015) [ 2016 (1) TMI 410 - ITAT BANGALORE ], ACIT Vs. .....

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roviding credit period in realization of sales proceeds with the transaction of providing services to the AE. Analysis: ITAT judgement treated extended credit period as an international transaction and then directed to treat it as a factor in determining ALP of sales of services. In one place, ITAT held that allowing credit period to AE is an international transaction then gives direction to TPO/AO not to treat it as individual/separate transaction but club it with sale of services for determina .....

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