TMI Blog2019 (4) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... historical average collection period of the assessee or reference can be drawn from statutory limits fixed by the legislature in the similar enactment. Therefore, we direct the TPO to determine the industry average or average of collection period adopted by the comparable companies selected for the TP study and calculate average collection period of the assessee during this assessment year. TPO has selected only 9 transactions which have crossed one month to determine the adjustment of TP whereas assessee has transacted total 31 transactions during this year. TPO has to calculate the average collection period for this year. Whether the average collection period is within industrial average or not has to be determined. Since we do not know the industry average, we remit this issue back to the file of TPO to determine the industrial average as directed above i.e. calculate the average collection period of the comparable companies selected for the TP study and average collection period of the assessee for the whole year. The collection during the year which are within the industry average should be allowed and only the collection period beyond industrial average alone should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CEB or TP document for the following transaction: Receivables ₹ 8,41,85,151 3.2 As regards software development services, the TPO observed that margin of the assessee is higher than the average margin of comparables selected by him. Thus, the price received by the assessee is beyond the ALP and in view of the provisions of section 92(3), no adjustment was proposed by TPO. 3.3 As regards receivables, the TPO noticed that the assessee has receivables of ₹ 8,41,85,151/- at the end of the year. The assessee was asked to submit the details of raising the invoice and subsequent receipt. It was proposed to charge interest @ 14.45% p.a to which the assessee replied that outstanding receivables are consequent to the international transactions of provision of SDS and not in the nature of any advance/loans. Since these are closely linked with the sale of services they have been aggregated with the principle transaction of sales for the purpose of economic analysis. It is fully funded entity and the sales and receivables are running accounts and the WCA duly considered the impact of outstanding receivables. The taxpayer has rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us raising the following grounds of appeal: 1. Ground No.1 1.1 That, the order of the Learned Transfer Pricing Officer ( Ld. TPO )/ Learned Assessing Officer ( Ld. AO )/ Learned Dispute Resolution Panel ( Ld. DRP ) is erroneous both on facts and in law. 2. Ground No.2 2.1 The Ld. TPO/ Ld. AO/Ld. DRP has erred both in facts and in law in recomputing the deduction u/ s 10AA of the Act at ₹ 10,78,97,665/ - as against ₹ 10,83,10,806/ - claimed by the Appellant. 2.2 The Ld. TPO/Ld. AO/ Ld. DRP has erred both in facts and in law in holding that telecommunication charges of Rs.ll,65,091/ - have to be reduced from the export turnover for the purposes of computing available deduction under section 10AA of the Act. 2.3 The Ld. AO has erred in not following the directions given by Ld. DRP that is not to include and enforce demand arising out of the disallowance of the excess exemption claimed by the appellant u/ s. 10AA of the Act. 2.4 The Ld. TPO / Ld. AO / Ld. DRP has erred both in facts and in law in not appreciating that having excluded telecommunication charges from export turnover, the said charges should also have been excluded from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of operating cost still the margin of the assessee is more than comparables. 3.10. The Ld. TPO/ Ld. AO/ Ld. DRP has erred both in facts and in law in only allowing ad-hoc credit period of 30 days and have failed to appreciate that the Reserve Bank of India allows a period of one year for receipt of export consideration. 3.11 The Ld. TPO Ld. AO/ Ld. DRP has erred both in facts and in law in not appreciating that the operating margin earned by the Appellant in relation to the international transactions is more than the arm's length margin determined by the Ld. AO, and therefore separate computation of notional interest on the value of outstanding receivables is not warranted. 3.12 The Ld. AO has erred both in facts and in law in not following the binding directions of the Ld. DRP in as much as the Ld. AO has computed notional interest up to the date of actual receipt whereas the Ld. DRP had directed that the same should only be computed up to the end of financial year, i.e. 31-03-2013. 4. Ground No.4 4.1 The Ld.AO erred in levying interest under Section 234B of the Act in spite of the fact that the Appellant had deposited more than 90% of the assessed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing receivables of ₹ 17,71,128/-, the ld. AR made similar submissions as made before DRP and relied on the decision of ITAT, Delhi Bench in the case of Bechtel India Pvt. Ltd., 1478/Del/2015 and other cases as per case law index. Further, he submitted that assessee has no debt in the company and not charged any interest on delay in payment either from AE or non-AE. 12. The ld. DR, on the other hand, filed written submissions, in which it was stated as under: 2. With regard to the grounds taken on charging of interest on receivables, it is humbly submitted that the grounds taken by the assessee are devoid of merit as the transaction falls under the purview of international transaction. Due procedure was followed by TPO in characterizing and determining the adjustment related to the said transaction. Merely because there is no clause in the agreement with AE to charge interest, the assessee cannot argue that adjustment to ALP cannot be made. This argument is in total contradiction to the principles of transfer pricing wherein the transactions need to be examined on principal to principal basis and not based on mere recitals in agreements. It is also submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not even obiter dicta on the substantial issue. On the other hand, as referred above, in the same case of Bechtel India P Ltd, Hon ble (TAT rendered a later decision, which is cited in the above Paragraph. 5. With regard to the computation of adjustment on account of interest on receivables, it is humbly submitted that the DRP directed the AO to compute the interest till the financial year end and as per the own calculation of the assessee filed before the ITO, Ward - 8(1)/ Hyderabad on 09/10/2017 the amount is ₹ 17,31,949/-. In this regard, Hon ble ITAT may issue appropriate directions to the AO to compute the amount in accordance with the directions of the DRP. 13. Considered the rival submissions and perused the material on record. We have considered the case law, relied on by assessee and noticed that these decisions are relating to assessment years involving prior to amendments made in Finance Act, 2012 in Section 92B. these ratios are relevant for those assessment years prior to amendment. Coming to the case on hand, this is for AY. 2013-14 the year in which the amendment come into force. Therefore, this is applicable from AY. 2013-14 onwards. 13.1 As t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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