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TMI Blog2018 (6) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue in these appeals are with reference to transfer pricing adjustment made on the receivables outstanding at the end of the year by TPO / A.O. 2. Briefly stated, Assessee Company is engaged in Providing Engineering and Geospatial Software that enables customers to visualize complex data. It filed return of income for the A.Y 2011-12 admitting total income of Rs. 17,48,69,830/- and in A.Y 2012-13 returned income of Rs. 12,64,10,490/-. Since the transactions with AE exceeded the limits prescribed the matter was referred to TPO for arriving at the 'Arms Lengths Price' on the international transactions reported. On the software development services, the TPO found that Assessee's profit margin (OP/OC) was at 30.06% and after due analysis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the coordinate Bench decision in the case of Pegasystems Worldwide India Pvt Ltd., Vs ACIT in ITA nos. 1758 & 1936/Hyd/2014 for A.Y 2009-10. It was further contended that Assessee's price received is considered as arm's length price in which working capital adjustments were also done and therefore the receivables alone cannot be considered as a separate 'international transaction'. It was submitted that receivables cannot be segregated as a distinct transaction to include interest separately and relied in the case of Kusum Healthcare Ltd., Vs ACIT in ITA No. 6814/Del/2014, where the Tribunal held that there can be no separate adjustment on the outstanding receivables. It was contended that since working capital adjustment has already ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.75% in A.Y 2012-13. 4. Assessee was aggrieved and raised similar objections before the DRP. DRP however rejected the contentions on the issue that outstanding receivables cannot be international transaction but considered the rate of interest and the period of interest levied on the objections raised by Assessee. It directed A.O to work out the rate of interest @ 5% and also to work out the outstanding amounts from the time of raising the invoice to the time of payment after giving 30 days credit period for A.Y 2011-12. A.O however without undertaking the exercise, repeated the same addition as proposed by TPO. 5. However, in the A.Y 2012-13, the DRP has differed from the findings in A.Y 2011-12 and determined variable rate of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion - III: Working capital adjustment f actors in rec eivables. i. Hon'ble Supreme Court ruling in the case of Kusum Healthcare Pvt. Ltd. Vs ACIT, Range-5 (ITA No. 6814/Del/2014). ii. Hon'ble High Court ruling in the case of Kusum Healthcare Pvt. Ltd. Vs ACIT, Range-5 (ITA No. 6814/Del/2014). iii. Kusum Healthcare Pvt. Ltd. Vs ACIT, Range-5 (ITA No. 6814/Del/2014). iv. Open Text Corporation India Pvt Ltd., (ITA No. 232/Hyd/2016). 8. Ld. DR, however, reiterated stand taken by TPO and DRP and referred to the provisions of Sec. 92B of the IT Act. 9. We have considered the rival contentions and perused the paper book placed on record. We find that the issue whether any notional interest is chargeable on receivable has been considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 SOT 525] (supra), TPO should have allowed some interest f ree period f or receiving the outstanding service charges. While acknowledging the order of the ITAT, TPO did not even bother to exclude the reasonable period and levied interest not only from the date of invoice to the date of realization during the year but also for the period beyond 31- 03-2010 in later year. We were inf ormed that no such addition was made in the later year on Assessee's receivables. We are of the opinion that both on the f acts of the case and principles of law, there is no need f or bringing to tax the notional interest on the outstanding receivables. Accordingly, we allow the grounds 7 & 8 of Assessee and direct AO/ TPO to delete the said addition made" ..... X X X X Extracts X X X X X X X X Extracts X X X X
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