TMI Blog2017 (4) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... unit - Held that:- AO has a strong basis to infer that there has been overlapping of functions of the employees between the two units. Thus we see no reason to interfere in his action in reallocating expenses within the meaning of section 145(3) of the Act. - Decided against assessee Addition in respect of ALP in respect of receivables due from AEs - Held that:- TPO made adjustment on account of notional interest for non-realization of its dues. There is no dispute that the transaction in question is not an independent transaction. It is an integral part of transaction of sale made to AE and therefore, it has to be considered along with main transaction. It is only w.e.f. assessment year 2012-13 amendment to section 92A was brought in the statute book. Since amendment is not applicable to the assessment year under consideration, law laid down by several co-ordinate benches like Goldstar Jewellery Ltd. vs. JCIT (2015 (2) TMI 58 - ITAT MUMBAI) is applicable wherein held that there can be no separate international transaction of 'interest' in the international transaction of sale. Early or late realization of sale proceeds is only incidental to transaction of sale, but not a "sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) had confirmed apportionment of salaries of ₹ 17,03,108/- to 10B unit and also upheld the ALP adjustment in respect of outstanding receivables exceeding six months from its AEs as labor rate. Further, the CIT(A) had not adjudicated ground relating to grant of credit for TDS of ₹ 67,87,988/-. 4. The revenue is in appeal being aggrieved by the deletion of addition in respect of apportionment of interest on working capital, factory overhead and director s remuneration to 10B unit. The assessee is in cross objections being aggrieved by the upholding of apportionment of salaries of ₹ 17,03,108/- to 10B unit and non-adjudication of ground regarding grant of credit for TDS and upholding ALP adjustment in respect of receivable etc. exceeding six months from its AEs. 5. Now, we shall take up the revenue s appeal. The revenue has raised the following grounds of appeal: 1. The Order of the Ld.CIT (A) is opposed to the law and facts of the case. 2. On the facts and circumstances of the case, the Ld.CIT (A) has erred in holding that the addition made by the AO was on conjecture and surmise when the AO had dealt the issue based on the facts brought on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee} of the Learned Commissioner (Appeals) is not justified in law and on facts and circumstances of the case. 2. As regards Transfer Pricing Adjustment of under section 92CA of IT Act: (1) The Learned Commissioner (Appeals) ought to have appreciated that the Learned DCIT is not justified in referring the case of the Assessee to the Learned TPO by invoking the provisions of the sections 92CA 92C (3) of the IT Act without satisfying the conditions laid out therein. (2) The Learned Commissioner (Appeals) ought to have appreciated that the Learned TPO is not justified applying transfer pricing provision to book debt, which can neither be regarded as an international transaction nor as an arrangement, understanding or action in concert within the meaning of section 92F (v) of IT Act. (3) The Learned Commissioner (Appeals) has failed to take cognizance of the fact that the Assessee did not charge any interest even to its non- AEs on the outstanding receivables and therefore, the Learned TPO is not justified in determining the Arm's Length Price interest in respect of book debt with the AE. 3. The Learned Commissioner (Appeals) ought to have appreciated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account and (c) the Learned DCIT is not justified in apportioning the salary cost between EOU Non-EOU in the ratio of turnover from manufacturing activity without bringing any cogent reasons. 5. The Learned Commissioner (Appeals) ought to have directed the Learned DCIT to give credit to TDS of ₹ 67,87,898/- while computing the total income of the Assessee when the Assessee had furnished original TDS certificates and specifically sought for the credit vide letters dated 18.03.2014 86 08.04.2013. For the above reasons and for such other reasons which may be allowed by the Honourable Members to be urged at the time of hearing, it is prayed that the aforesaid cross-objections be allowed. 10. At the outset, it is noticed that there is a delay of 112 days in filing of cross objections. The assessee had filed condonation petition praying for condonation of delay on the ground that the delay has occurred because of re-structure in the organization and the key personnel and employees looking after tax matters left the organization, there was no deliberate intention on the part of the assessee. Thus, it was prayed that it was prevented by sufficient and reasonable cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No.4 of cross objections is dismissed. Ground No.2 of Cross objection challenges the confirmation of ALP adjustment in respect of amount due from AEs. The TPO made adjustment on account of notional interest for non-realization of its dues. There is no dispute that the transaction in question is not an independent transaction. It is an integral part of transaction of sale made to AE and therefore, it has to be considered along with main transaction. It is only w.e.f. assessment year 2012-13 amendment to section 92A was brought in the statute book. Since amendment is not applicable to the assessment year under consideration, law laid down by several co-ordinate benches like Goldstar Jewellery Ltd. vs. JCIT (ITA No.6570/Mum/2012 dated 14/01/2015) is applicable and in the case of M/s.Avnet India Pvt. Ltd., vs. DCIT [IT(TP)A No.757/Bang/2011 dt.18/11/2015] to which one of us is a party, it has been held as follows: 8. We have heard the rival submissions. The assessee company reported international transactions in its TP report. On a reference by the AO, the learned TPO accepted that the price charged by the assessee company on these transactions are at arm's length. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction should be aggregated and clubbed together. When the transaction are influenced by each other and particularly in determining the price and profit involved in the transaction then those transactions can safely be regarded as closely lined transactions. In the case in hand, the credit period extended to the AE is a direct result of sale transaction. Therefore, no question of credit period allowed to the AE for realization of sale proceeds without having sale to AE. The credit period extended to the AE cannot be treated as a transaction stand alone without considering the main transaction of sale. The sale price of the product or service determined between the parties is always influenced by the credit period allowed by the seller. Therefore, the transaction of sale to the AE and credit period allowed in realization of sale proceeds are closely linked as they are inter linked and the terms and conditions of sale as well as the price are determined based on the totality of the transaction and not on individual and separate transaction. The approach of the TPO and DRP in analyzing the credit period allowed by the assessee to the AE without considering the main international transa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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