TMI Blog2020 (9) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... l/2017 - - - Dated:- 7-9-2020 - Shri R.K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Assessee : Shri Neeraj Jain Shri Abhishek Aggarwal, Adv. For the Revenue : Shri Surenderpal, CIT, DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 31st March, 2013 of the AO passed u/s 144C(1) r.w. section 143(3) of the IT Act, 1961, relating to assessment year 2013-14. 2. The grounds raised by the assessee are as under:- 1.1 That the impugned order of assessment framed by the assessing officer in pursuance of the directions of the Dispute Resolution Panel (hereinafter referred to as DRP ) under Section 143(3) read with Section 144C of the Income-tax Act, 1961 ( Act ), is bad in law, violative of principles of natural justice and void ab-initio. 2.1 That the assessing officer erred on facts and in law in making an adjustment of ₹ 4,71,35,199 to the arm s length price of the international transactions of accounts receivable undertaken with the associated enterprise on the basis of order passed by the Transfer Pricing Officer ( TPO )/ Dispute Resolution Panel ( DRP ). 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without provide reasonable opportunity to the appellant thereby violating the natural principles of justice. 2.11 Without prejudice, that on the facts and in the circumstances of the case and in law, the DRP/TPO erred on facts and in law in not appreciating that the in terms of Master Circular No. 10/2011-12, Reserve Bank of India allows a period of 12 months to all companies for receiving repatriation of export sales proceeds, and therefore, interest if any, ought to be imputed on the period of delay beyond 12 months. 3That the assessing officer erred on facts and in law in not allowing foreign tax credit of ₹ 14,08,409 while computing tax liability of the appellant. 4 That the assessing officer erred on facts and in law in levying interest under Section 234B and Section 234C of the Act. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal. 3. Ground of appeal No.1.1 being general in nature is dismissed. Grounds of appeal No.2.1 to 2.11 relate to the order of the AO in making transfer pricing addition of ₹ 4,71,35,199/- being interest on receivables. 4. Facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the facts, a mark-up of 100 basis points is appropriate towards the additional risks. This must be added to the interest rate plus 300 basis points discussed above. The AO/TPO is thus directed to compute the adjustment using a CUP based on the 6 month LIBOR rate for currency in which invoicing of receivables has been done, in accordance with the decision in Cotton Naturals plus 400 basis points to cover additional risks, transaction costs, security, credit rating, arising from these transactions in light of discussions supra. TPO is thus directed to adopt a Libor+400 basis points CUP . 6. The TPO accordingly made an upward adjustment of ₹ 4,71,35,199/-, the details of which are as under:- S.No Nature of international transaction ALP determined by taxpayer (Rs.) ALP determined by this office (Rs.) Adjustment u/s 92CA (Rs.) 1. Receivables- During the year NIL 90,48,241 90,48,241 2. Receivables-Opening NIL 3,80,86,958 3,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various decisions including the decision of the Hon ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd. (supra), has deleted the addition on account of interest on receivables by observing 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 foreign AEs would automatically be characterised as an international transaction. There may be a dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate 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 2010-11 and up to 417 days qua AY 2012-13 as per detail of invoices raised on unrelated parties qua AY 2012-13, available a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chtel India Pvt. Ltd. (supra) wherein SLP filed in the Hon ble Supreme Court has been dismissed. 23. In view of what has been discussed above, TPO/DRP/AO have erred in making adjustment on account of arm s length interest which is not sustainable in the eyes of law, hence no adjustment on account of interest on receivables can be made. So, Grounds No.2 to 2.9 are determined in favour of the taxpayer. 12. We find, following the above decision, the Tribunal in assessee s own case, vide ITA No.8726/Del/2019, order dated 29th June, 2020 for A.Y,. 2015- 16, has deleted the addition on account of notional interest on receivables by observing as under:- 32. Now coming to the next issue raised in the present appeal against the transfer pricing adjustment made on account of interest due on receivables outstanding. The said issue stands covered in favour of the assessee by the decision of the Tribunal in assessee s own case for Assessment Year 2010-11 in ITA No.1104/Del/2015 and for Assessment Year 2012-13 in ITA No.1115/Del/2017 vide order dated 12.12.2017. The Tribunal has relied on the decision of Hon ble Delhi High Court in Pr. CIT-V vs Kusum Health Care Pvt.Ltd. in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
