TMI Blog2020 (7) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... high Court in Kusum Healthcare Ltd. (supra) and also in line with the findings of the Tribunal in M/s. Global Logic India Ltd. [ 2017 (12) TMI 1052 - ITAT DELHI] we find no merit in making any adjustment on account of interest due on receivable from its AE. - Decided in favour of assessee. - ITA No. 1909/HYD/2017 And ITA No. 1910/HYD/2017 - - - Dated:- 9-7-2020 - Ms. Sushma Chowla, VP And Mr. Anil Chaturvedi, AM For the Appellant : Shri P.Murali Mohana Rao, AR For the Respondent : Shri Y.V.S.T. Sai, CIT DR ORDER PER MS. SUSHMA CHOWLA, VICE PRESIDENT Both the appeals of the assessee are directed against separate orders of Assessing Officer passed u/s 143(3) r.w.s 92 CA(3) of the Income Tax Act, 1961 (in short the Act ) relating to assessment year 2013-14. 2. The assessee has raised following grounds of appeal, which read as under:- 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. The Ld. AO erred in not issuing Draft Assessment order as per procedure laid down u/s.144C(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in a case where after reducing the adjustment as a percentage of operating cost still the margin of the appellant 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 90 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. The above grounds are independent and without prejudice to one another. The appellant craves leave to alter, amend or withdraw all or any of the grounds of appeal herein or add any further grounds as may be considered necessary and to submit such statements, documents and papers as may be considered necessary either before or during the appeal hearing . 3. Both these appeals relating to connected assessee were heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble was determined as ₹ 1,76,612/-. The AO passed final assessment order, against which the assessee is in appeal before us. 6. The learned AR for the assessee pointed out that that there were two limbs to his arguments. He further pointed out that the margin of the partnership firm were higher than that of the comparables and no transfer pricing adjustment was made in the segment of provision of Software Development Services to the AEs. He further pointed out the operating margins were factored in the higher margins of the assessee. He also pointed out that working capital adjustment was allowed to the assessee. Coming to the upward adjustment made on account of interest on receivables, he further stated as against AEs period of 72 days, in the case of comparable it was 90 days. He thus stated that there was no merit in making the aforesaid adjustment. He also pointed out that while applying the transfer pricing provisions, an apple is to be compared to an apple and where the comparable were receiving the outstanding after a period of 90 to 120 days, the delay in receiving the outstanding by the assessee was lesser and hence no adjustment is to be made in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on receivables. This issue has also been decided by Hon ble Delhi high Court in case of Pr. CIT-1 vs M/s. Bechtel India Pvt. Ltd. in ITA 379/2016 order dated 21.07.2016. The relevant findings of the order of the Tribunal (supra), order dated 12.12.2017 are in paras 14 to 18 which read as under:- 14. Provisions contained under Explanation (i), (a) (c) of section 92B have been analyzed by Hon ble Delhi High Court in case cited as Pr. CIT-V vs. Kusum Health Care Pvt. Ltd. in ITA 765/2016 order dated 25.04.2017, wherein it is held that the expression added in Explanation to section 92B does not mean that de hors the context, every item of receivables appearing in the accounts of an entity, which may have dealing with foreign AE, would automatically be characterized as an international transaction and decided the issue in favour of the taxpayer by returning following findings :- 10. The Court is unable to agree with the above submissions. The inclusion in the Explanation to Section 92B of the Act of the expression receivables does not mean that de hors the context every item of receivables appearing in the accounts of an entity, which may have dealings with foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. taxpayer earned 38.39% OP/OC margin vis- -vis margin of comparable companies at 11.43%. In such circumstances, no separate adjustment on account of interest can be made. Because the credit period extended to AE cannot be considered as a standalone transaction without considering the main transaction of the sale. 17. Furthermore when the taxpayer is undisputedly a debt free company, as it is not the case of the ld. TPO that borrowed funds have been appropriated enabling the AE to make the delayed payment on receivables. So when outstanding receivables is not a separate international transaction, the delay in realization of the sale proceeds is incidental to the transaction of sale and as such no notional interest can be levied by treating the same as unsecured loan. 18. Furthermore it is the case of the taxpayer that when the taxpayer is not charging interest from unrelated third party / non AE, in case of such delay, no adjustment on interest in case of AE can be made and drew our attention towards the details of invoices raised qua unrelated parties available at page 183A of the paper book wherein delay in realization of the receivables is also up to 218 days for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X
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