TMI Blog2018 (12) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, as also held in various decision relied by the ld. AR. The case of the assessee stands on parallel footings EVONIK DEGUSSA INDIA P. LTD. VERSUS ASSTT. COMMISSIONER OF INCOME TAX, MUMBAI [2012 (11) TMI 1248 - ITAT MUMBAI] In the case in hand, there is no interest liability or any external borrowings. In the agreement too, there is no condition to charge any interest for delayed payments by the AEs. The Revenue could not be able to adduce any contrary material against the aforesaid decision. Therefore, respectfully following the decision of co-ordinate Bench, the ld. Authorities below are not justified to make addition on inter-company receivables, as computed by them. Accordingly, the appeal of the assessee deserves to be allowed on this count. The other grounds raised by the assessee are consequential to this issue and therefore, the same do not need separate adjudication. - Decided in favour of assessee - ITA No. 826/Del./2015 - - - Dated:- 20-12-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For The Appellant : Shri Nageshwar Rao and Purushottam Anand, Advocates For The Respondent : Ms. Princy Singla, Sr. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction. 7. The learned AO / TPO / DRP failed to appreciate that once working capital adjustment is granted, no separate adjustment is required on account of interest on outstanding receivables. 8. The learned AO/TPO/DRP have erred in re-computing the arm s length margin of international transaction pertaining to IT-enabled services. 9. The learned AO has grossly erred in initiating penalty proceedings under section 271 (1 )(c) of the Act. 10. The learned AO has erred in levying interest under section 234B of the Act while completely disregarding the provisions of the Act and the judicial precedence. 2. The brief facts of the case are that the assessee filed return of income on 30.09.2010 declaring income of ₹ 15,47,056/-. The case was selected for scrutiny and statutory notices were issued to the assessee. During the course of scrutiny proceedings the ld. AO observed that the assessee has entered in the international transactions with its Associate Enterprises worth ₹ 1,15,84,12,481/-. Therefore, the same was forwarded to the ld. Transfer Pricing Officer (TPO) for determination of Arm s Length Price (ALP). The assessee, Metlife Global Opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Invoice Date Total billed (in INR) Party due date Realisation date Delay in reallsa tion Interest on delayed time (@14.88%) ITES for Apr 09 28-05-2009 7,34,72,840 27-06-2009 01-07-2009 4 1,11,77 1TES for May - June 09 08 07-2009 15,11,04,098 07-08-2009 24-09-2009 48 27,81,79 ITES for ]uly09 06-08-2009 8,35,70,771 05-09-2009 04-12-2009 90 29,07,93 ITES for Aug09 Z2-09-2009 8,70,41,545 22-10-2009 04-12-2009 43 14,34,12 ITES for Sept 09 22-10-2009 9,64,78,867 21-11-2009 20-01-2010 60 22,25,27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent of ₹ 1,14,32,576/- and deleted the addition of ₹ 7,86,53,767/- with respect to provision of IT Enabled Services. The AO accordingly also made rectification vide order dated 04.02.2015 u/s. 154 in final assessment. Aggrieved, the assessee is in appeal before the Tribunal. 4. The LD. Authorised Representative reiterated the submission made before the lower authorities and submitted that the lower authorities are not justified to make addition as per provisions of section 92CA (3) of the Income Tax Act, 1961. He also objected regarding application of CUP method adopted by the TPO for addition on Receivables. The ld. TPO did not concur with economic analysis undertaken by the assessee and modified the list of comparables companies for determining the ALP of the impugned transactions. The ld. TPO did not agree with the assessee s contentions and in view of expended definition of international transaction inserted retrospectively, proceeded to benchmark the interest on inter-company outstanding receivables (arising on account of provision of IT-enabled services) by treating it as advancing of unsecured loan to its AE and computed notional interest thereon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of interest there from, since outstanding receivables emanate from the service transaction itself, which has already been benchmarked. The ld. AR, therefore, submitted that determination of ALP in respect of outstanding receivables from inter-company transactions is not required, once ALP of inter-company transactions has been already determined and no separate adjustment is necessary in this regard. 7. Regarding re-characterization of outstanding receivables as unsecured loan advanced to AE, it was submitted that the learned TPO has erroneously re-characterized outstanding receivables as unsecured loans advanced by the assessee to its AE, ignoring the facts and circumstances of the case and without understanding and appreciating the bona-fide nature of terms of Agreement entered into by the assessee with its AE. The learned TPO has failed to understand and appreciate the bona fide nature of terms of the written agreement between the assessee and the AE regarding credit period allowed to the AE. In this respect, he drew our kind attention to the decision of the jurisdictional Delhi bench of the Hon ble ITAT in the case of Sony India Private Limited (2008) 114 ITD 448 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistration does not share the same views as to how the transaction should be structured. ( Emphasis supplied) 9. In this context, reliance is also placed on the decision in the case of Evonik Degussa India Private Limited (ITA No. 7653/MUM/2011) and Abhishek Auto Industries Limited (2010) 136 TTJ 530. On the strength of these decisions, it is submitted on behalf of the assessee that it was necessary for the Income-tax authorities to accept and recognise a transaction as such and not to dictate or govern the terms thereof. Several other decisions of ITAT are also relied by the ld. AR of the assessee. He further submitted that the case laws relied by the Revenue are on different footings, therefore, the same are not applicable in the present facts of the case. 10. On the other hand the Ld. DR relied on the order of the lower authorities and submitted that the lower authorities are justified to make addition on receivables. Therefore, the order of the authorities below should be restored. He further submitted that the assessee has received payments beyond the prescribed period as per agreements made between the parties regarding sales realization. The ld. TPO has righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, the payment is being received. Therefore, the delay is not wholly on account of late payment by the A.Es only. Moreover, the T.P. adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. Thus, on the facts and circumstances of the case, we are of the opinion that addition on account of notional interest relating to alleged delayed payment in collection of receivables from the AEs, is uncalled for on the facts of the present case and is, accordingly, deleted. 12. In the case in hand, there is no interest liability or any external borrowings. In the agreement too, there is no condition to charge any interest for delayed payments by the AEs. The Revenue could not be able to adduce any contrary material against the aforesaid decision. Therefore, respectfully following the decision of co-ordinate Bench, the ld. Authorities below are not justified to make addition on inter-company receivables, as computed by them. Accordingly, the appeal of the assessee deserves to be allowed on this count. The other grounds raised by the assessee are consequential to this issue and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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