TMI Blog2021 (1) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... acts has held that once TNMM method is considered as the most appropriate method, the net margin worked out thereunder could take care of all such notional interest cost, wherever it could be imputed and there could be no arm s length price adjustment for any overdue receivables. The Bench has also observed that once there is complete uniformity in not charging any interest from any party, whether Associated Enterprises or non- Associated Enterprises, there could not be any selective imputing of notional interest on receivable from AE for belated realization of export bills. We are of the considered view that when TNMM method has been applied as most appropriate method it could take care of all notional interest costs wherever it could be applied and there could be no separate upward adjustments on export receivables for belated realization of export bills. Hence, we direct the Assessing Officer to delete upward adjustment made towards overdue receivables from Associated Enterprises. Appeal filed by the assessee is allowed. - I.T. (TP)A.No.57/Chny/2019 - - - Dated:- 28-12-2020 - SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER Appellant by : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the DRP ought to have appreciated that when the TPO sought to impute interest on belated receipt of trade receivables, the same principle should be applied for early receipt of trade receivable and the interest proportionate to early receipt should be net off against the levy of belated receipt of interest, 3.8 Without prejudice to levy of notional interest, the DRP/TPO/AO erred in not considering higher number of days as credit period instead of considering 45 days as normal credit period which does not have any basis. 3.9 Without prejudice to ground no.6. the DRP/TPO/AO erred in not considering the fact that the RBI guidelines provides for a credit period of 270 days to collect the invoices raised. 3.10 Without prejudice to levy of notional interest the DRP/TPO ought to have reckoned the LIBOR rate of interest instead considering SBI interest rate as the trade receivable were in foreign currency. 3.11 Without prejudice to the above, the foreign exchange gain of Rs. 7,28,91,706/- should be netted off against the notional interest charged on delayed receipt of trade receivables. 3.12 Without prejudice to the above, the DRP ought to have appreciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of corporate guarantee, there is no upward adjustment is required for providing corporate guarantee. However, in respect of export receivables, the TPO noted that in view of amendment to section 92B of the Income Tax Act, 1961 by the Finance Act, 2012 w.e.f. 01.04.2002 receivables has been included in the definition of international transactions under clause c of Explanation to section 92B as Capital financing and hence, export receivables from AEs for belated realization needs to be benchmarked and accordingly, computed arm s length price by taking interest rate of 13% over and above the normal credit period and made upward adjustment of Rs. 5,65,32,966/- 4. Pursuant to the TPO order, the Assessing Officer has passed draft assessment order u/s.143(3) r.w.s 144C(1) of the Act on 16.11.2018 and made upward adjustment of ₹ 5,65,32,966/- towards interest on overdue receivables. Being aggrieved by the draft assessment order , the assessee has filed objections before the DRP-II, Bengaluru and challenged the upward adjustment made by the Assessing Officer towards receivables from AE on the ground that when the assessee has not charged any interest on receivables from the AE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer towards upward adjustment on overdue receivables should be deleted. 6. The learned DR, on the other hand, supporting the order of the TPO as well as DRP submitted that from the assessment year 2002- 03 onwards the definition of international transactions has been amended so as to include receivables, therefore, when the assessee has allowed excess credit period over and above the normal credit period of AE, then the same needs to be benchmarked and hence there is no error in the findings recorded by the learned TPO as well as DRP in computing arm s length price on export receivable and hence, their orders should be upheld. 7. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that receivables is included under the definition of international transactions by amending section 92B by the Finance Act, 2012 w.e.f. 01.04.2002. Therefore, we are of the considered view that there is no merit in the arguments advanced by the assessee that receivables is not international transactions. As regards benchmarking international transactions, once the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an approach if accepted will completely overlook commercial realties. That apart, once TNMM method is considered as the most appropriate method, as held by Ahmedabad Bench of the Tribunal in the cases of Bisazza India (P) Ltd (supra) and Gemstone Glass Pvt Ltd (supra) the net margin worked out there under could take care of all such notional interest cost, wherever it could be imputed and there could be no Arms Length Price adjustment for any overdue receivables. We therefore delete Arms Length Price adjustment of Rs. 6,18,43,887/- made on overdue receivables. 8. In this view of the matter and consistent with the view taken by the co-ordinate Bench of this Tribunal in assessee s own case for the earlier assessment year, we are of the considered view that when TNMM method has been applied as most appropriate method it could take care of all notional interest costs wherever it could be applied and there could be no separate upward adjustments on export receivables for belated realization of export bills. Hence, we direct the Assessing Officer to delete upward adjustment made towards overdue receivables from Associated Enterprises. 9. In the result, appeal filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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