TMI Blog2020 (9) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not in-consonance with the actual figures and the calculations considered by the TPO as well as the DRP at the time of assessment proceedings. The facts of the assessee s case are identical in the present year to that of A.Y. 2010-11 which is already decided by the Hon ble Delhi High Court [2017 (4) TMI 1254 - DELHI HIGH COURT] in assessee s favour. No distinguishing facts were pointed out by the Ld. DR. - Decided in favour of assessee. - I.T.A. No. 3717/DEL/2017 - - - Dated:- 1-9-2020 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Appellant by : Sh. Vishal Kalra Sh. S. S. Tomar, Advs Ms. Reema Malik, Adv Respondent by : Sh. M. Barnwal, Sr. DR ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the order dated 30/05/2017 passed by Addl. Commissioner of Income Tax, Special Range-5, New Delhi under Section 143(3) read with Section 144C (13) of the Income Tax Act, 1961 for Assessment Year 2013-14. 2. The grounds of appeal are as under:- 1. That on the facts and in the circumstances of the case and in law, the order passed by the Learned Assessing Officer ('AO') / Transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate penalty proceedings under section 271(l)(c) of the Act mechanically and without recording any adequate reasons for such initiation. That the above grounds and sub grounds of objections are without prejudice to each other. 3. The assessee is engaged in manufacturing and sale of pharmaceutical goods / medicines and consists of major revenues on account of export of such pharmaceutical goods / medicines. The assessee filed return of income on 10/02/2015 declaring income at ₹ 45,01,13,530/-. The assessee had entered into international transactions with the associate enterprises (A.Es). A reference was made u/s 92CA (3) of the Income Tax Act, 1961 to the Transfer Pricing Officer (TPO) in viw of international transactions of ₹ 116,38,13,687/-. The TPO vide order dated 06/10/2016 has made an adjustment of ₹ 1,89,33,756/- towards Arm s Length Price (ALP) on account of interest chargeable on delayed receivable. The draft assessment order was passed u/s 144C(1) read with Section 92CA (3) on 21/12/2016 computing assessed income at ₹ 46,90,47,286/-. The assessee company filed objections against draft assessment order, before Dispute Resolution P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eivables on the profitability of the tested party vis- -vis the comparable companies, so as to bring parity in the working capital investment of the tested party and the comparable companies rather than looking at the receivables independently. During the course of assessment proceedings, an analysis of working capital adjustment was undertaken by the assessee for the comparable companies selected in the TP report. The Ld. AR relied upon the decision of the Hon ble Delhi High Court in assessee s own case for A.Y. 2010-11 being ITA No. 765/2016. Without prejudice to the above submissions, the Ld. AR further submitted that in respect of the observations of TPO/DRP/AO in treating outstanding receivables from AE as loan advanced, the non-charging of interest on overdue balances of AE should be compared with other cases in which the assessee has extended the credit period to non-group companies i.e., which would serve as an internal CUP. In this respect, the Ld. AR submitted that no interest has been charged on the overdue balances from unrelated third parties as is the case for outstanding receivables from AE. The Ld. AR further pointed out that AE is the key customer of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee (i.e. Kusum Healthcare) was also considered in addition to some other case-laws. Whether the working capital adjustment factors in the impact of such delayed realization of receivables, has also been analyzed by Tribunal in view of the facts of the case which are identical to the case of the appellant and decided against the assessee. It is also urged before the Bench that res-judicata is not applicable in income-tax proceedings and reliance in this regard is placed on the decision of jurisdictional High Court in the case of Krishak Bharati Cooperative Ltd vs. DCIT [2012] 23 taxmann.com 265 (Delhi) wherein Hon ble Delhi High Court has held that the rule of consistency should not create anomaly. As regards to Ground Nos. 2.1 2.6 relating to application of interest rate @ LIBOR plus 400 bps applied by the TPO/AO and upheld by Ld. DRP, the Ld. DR submitted that necessary discussions have been recorded by the TPO in para-20 at P/13 of his order. The TPO has considered the reply of the appellant and applied the interest rate of LIBOR plus 400 bps keeping in view the currency of payments received, opportunity cost and the discussions findings of Ld. DRP in AY 2011-12 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P/16-17. The DRP have noted that there was categorical mention of charging interest on delayed payments against sale beyond a period stipulated in the agreement with the non-AE and the AE. The assessee took the argument that it did not recover any interest from either parties. The DRP have given its findings that the material factor for scrutiny from transfer pricing angle was not whether the assessee is charging any interest on the overdue outstanding receivables from its AEs or non-AEs or not but actually what should have been time value of money and what price was imputable to the time value of money. The DRP have also discussed relevant case-laws, OECD definitions / guidelines and finally upheld the action of the Assessing Officer. As regards to Ground No. 2.5, the assessee submitted that it is a low debt company and no borrowed funds have been utilized to pass on the credit facility. This issue has also been considered by the DRP at P/18 and have given its findings that in view of their detailed discussions decisions w.r. to substantive grounds 2.3 2.4, the same is only academic and hence infructuous. The facts show that the period of delay of realisation of such outstand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has claimed that it is a low debt Co. It is seen that the Trade receivables account for 67.9% of total funds in FY 2012-13 in the case of AE and 9.03% in the case of Non AE. Further, if compared with the 105.53 Cr 14.04 Cr. NA NA sales of the year the Trade receivables comes to 121.72% of total sales to AE whereas it is 32.7% in the case of non AE. Comments in below mentioned para 4.2.10 may kindly be refer to. The assessee is engaged in sales of various pharmaceuticals products to both AE non AE. The appellant has claimed that it is a low debt Co. which is a matter of fact but has no relevance to the issue. From the figures reproduced above in para 4.2.9, it is abundantly clear that the Trade receivables account for 67.9% of total funds in FY 2012-13 in the case of AE and it is 9.03% in the case of non-AE. Further, if compared with the sales of the year the Trade receivables comes to 121.72% of total sales to AE whereas it is 32.7% in the case of non-AE. The Bifurcated fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observations of Hon ble Delhi High Court, it is abundantly clear that Hon ble Court has not categorically stated that no adjustment for overdue trading receivables can be made. The Hon ble High Court has in fact given a clear finding that a proper inquiry may be made by analysing the statistics over a period of time to discern a pattern which would indicate that vis- -vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. The facts, statistics, ratios analysis of such facts/statistics as discussed in para 4.2.9 4.2.10 clearly make out the pattern which indicate such arrangement between the assessee and the AE which are intended to benefit the AE in some way. The Ld. DR relied upon the decision of the ITAT in the case of Techbooks International Pvt. Ltd., ITA No. 6102/Del/2016, order dt. 06.07.2020. Paras relevant to the issues are 16 to 23 at P/8-14 of the order. The facts in the case of Techbooks International are identical to those in the case of the assessee. The issue in the case of the assessee and all the grounds of appeal of the assessee including treatment of such outstanding re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2.1, 2.2, 2.5 and 2.6 are dismissed. As regards to Ground Nos. 2, 2.3, 2.4 and 3, the assessee has given a calculation of interest an outstanding receivables for bills raised during the Financial Year 2012-13 given an outstanding receivables along with details of Invoice Number, Shipment date, party name, CIF Value in rupees, exchange rate, calculation amount in foreign currency and Indian Rupees, collection date and thereafter the assessee has also calculated the period of realization in cases where the collection date is restricted up to March 31st, 2013. The Transfer Pricing Officer re-characterized outstanding receivables for the period exceeding 180 days as unsecured loans advanced by the assessee who is its AE s and imputed interest profit call to LIBOR plus 400 basis points (resulting in interest rate of 5.013%). The invoices are raised and payment is received in foreign currency. The profit loss index outstanding receivables as unsecured loans on account of delay in receipt of payment are merely re-characterization of outstanding receivable and not an actual international transaction. The law only requires actual transactions to be at Arm s Length and does not permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even extended beyond the respective Financial Year under consideration. We have observed that the submissions of the Ld. DR and the calculations given during the hearing are not tenable as it has not considered the calculations given by the assessee before the TPO/Assessing Officer/DRP. Thus, the calculations given by the Ld. DR at this juncture will not appropriate as the case of the assessee is regarding outstanding receivables and the principal of Techbooks International (supra) will not apply in the present case. In this present assessment, the assessee has given all the details which was reproduced by the Transfer Pricing Officer (TPO) it its order and without discussing calculations and the evidences produced by the assessee, simplicitor made adjustment. There was no contrary facts given by the TPO in consonance with the evidence produced by the assessee before the TPO. The facts of Techbooks International (supra) are totally difference which can be emerged from the para of the said decision where the assessee s case for Assessment Year 2010-11 has been taken into account. Thus, the calculation given by the DR in his submissions is not inconsonance with the actual figures and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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