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TMI Blog2019 (10) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... :- S.No. Name of the associated enterprise Nature of Transaction Amount Received (INR) 1. M/s Siddhartha Jewellery (UK) Ltd. Export of Jewellery 948,567,232 3. The TPO noted that the assessee has provided interest free loans to its AE of GBP 2 lac in F.Y. 2004-05 and that loan is still pending. He, therefore, asked the company to explain the reasons for interest free loan granted to the AE. Rejecting the various explanations given by the assessee and relying on various decisions, the TPO proposed an adjustment of Rs. 11,66,447/-. The TPO further noted that the assessee has realized the export proceeds after a period of 60 days. On being questioned by the Assessing Officer, it was explained that the export transaction is not loan transaction and the RBI guidelines allow remittance in 180 days and in case of SEZ units in 360 days. It was explained that the contract with AE is for 60 to 120 days of credit i.e., average 90 days. Further, no credit is given for advance payment received and payment received before due date. It was further submitted that if for calculation of overdue amount 90 days average sundry debtors are taken, no monthly outstanding amount is overdue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case has erred in law and on facts in attributing notional interest on loan to AE 4.3 That the TPO/AO/DRP erred in view of facts and circumstances of case and in law and on facts in not appreciating the underlying functional assets and risk analysis of the transaction of loan to AE 4.4 That the TPO/AO erred in facts and circumstances of case and in law in not appreciating that the loan is advanced on account of commercial expediency. The DRP erred on facts and in law in disregarding the claim of the appellant on the ground that appellant has failed to substantiate the "Commercial Expediency" of the transaction. 4.5 That the TPO/AO/DRP erred in facts and circumstances of case and in law in disregarding the agreement between the appellant and AE with respect to the fact that consideration towards loan advanced shall be embedded in the sale price of jewellery and no separate consideration shall be charged for it. 4.6 That the TPO/AO/DRP erred in law and on facts in not appreciating that interest on loan advanced embedded in sale price is at arm's length being within permissible +/- 5% range as provided in second proviso to sec 92C(2) 4.7 Without Prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 9485.67 lacs represents 59 days average and no export invoice is outstanding more than six months, so the stand of TPO of NON REALIZATION is ILLEGAL. 5.4 That the TPO/AO/DRP has kept 60 days, we failed to understand from where 60 days are arrived. 5.5 As per contract with AE 60-120 days for repayment, hence 90 days average credit is permitted to AE as per contract and accordingly the export shipment were priced. We failed to understand 60 days period taken by TPO for realization of Export proceeds. He insisted us to make charts and provides information based on 60 days otherwise he will do ex-partie. That the approach, adopted by the TPO in determining arm's length price in making the adjustment of Rs. 81,14,878 /- in respect of interest on outstanding receivables from the AE's is not correct, since the interest cost has to be considered along with the cost of goods and hence such adjustment is uncalled for. Further this comes within the purview of five percent variation to associated enterprise. (Total Exports to AE is Rs. 9485.67 Lacs, 5% variation comes to Rs. 474.00 Lacs). 5.6 That the TPO/AO/DRP erred in facts and circumstances of case and in law in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtors on monthly outstanding basis comes to Rs. 246108/-. without prejudice the same may be charged upon. 5.12 That the TPO/AO/DRP erred in law and on facts in not appreciating that interest on outstanding receivables embedded in sale price is at arm s length being within permissible +/-5% range as provided in second proviso to sec 92C(2) 5.13 That the AO/TPO/DRP erred in arbitrarily taken a period of 60 days. The same is illegal without any basis. 5.14 That the AO/TPO/DRP erred in not giving the assesse the benefit of averaging. 5.15 Without prejudice, the interest rate charged as directed by DRP should be 4.50%, instead of 4.83% (Libor + 4%). However even 4% rate is also excessive. 6. Without prejudice, the transactions are within the permissible limit of 5% as the alleged variation on account of extended credit period beyond 60 days is hardly significant considering value of export to AE and alleged interest from AE is hardly significant considering the value of exports to AE. Hence no addition is called for. 7. That without prejudice TPO/AO/DRP has failed to consider the advance amount received from AE. In any case, same should have been considered for working ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer, in the instant case, on the basis of the report of the TPO, made addition of Rs. 81,14,875/- being interest on unrealized export proceeds @ 12.65 per annum when the outstanding was received beyond a period of 60 days from the date of invoice. We find, the DRP restricted such disallowance to Rs. 30,98,408/-. We find identical issue had come up before the Tribunal in assessee's own case for assessment year 2011-12. We find the Tribunal, after considering the arguments made by both the sides has held that the period of 90 days credit is reasonable in the trade of the assessee and accordingly it was restored to the file of the A.O./TPO to compute the transfer pricing adjustment of receivables having delay in receipt of payment of more than 90 days. The relevant portion of the order of the Tribunal reads as under:- "20. As far as the issue of request of the Ld. Counsel for allowing credit of 90 days is concerned, we find that this period of 60 days adopted by the Ld. TPO or 90 days requested by the assessee depend on the prevalent business practice in the trade. The Ld. Counsel has pointed out before us that in assessment year 2015- 16 the Ld. TPO himself as considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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