TMI Blog2020 (6) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and decide the issue as per fact and law. We hold and direct accordingly. The first issue raised by the assessee in the grounds of appeal is accordingly allowed for statistical purpose. Interest on outstanding receivables - HELD THAT:- Working capital adjustment has been provided by the DRP for the services segment which already takes into account the impact of the outstanding receivables. Further in the impugned assessment year the outstandings payable are more than the outstandings receivable and average payment period to its AE is 176 days whereas the average collection period from its AE is only 19.55 days which is evident from page 331 of the paper book. Therefore, in our opinion, no adverse inference is warranted on account of receivables from the AE. No interest has been charged from third parties by the assessee on account of delay in payment. Under these circumstances and in the light of the decision of Hon ble Delhi High Court in the case of Kusum Health Care (P) Ltd.[ 2017 (4) TMI 1254 - DELHI HIGH COURT ] we are of the considered opinion that no adjustment on account of interest on receivables is called for. The AO is directed to delete the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f trading of medical equipment, the TNMM analysis was used to bench mark the arms length nature of the international transaction of purchase of medical equipment. The TPO disregarded the assessee s bench marking and determined the ALP of purchase of fixed assets as nil. Similarly the TPO also made an adjustment on account of receivables amounting to ₹ 45,793/-on the ground that the payments for invoices raised by DHR India on its AE s were not received within the year. Therefore, he re-characterised the outstanding receivables as unsecured loan and held that interest be levied at the rate of 11.69% being SBI base rate + 300 basis points. There is another adjustment suggested by the TPO i.e. provision of business support services amounting to ₹ 1,57,44,824/-. However, since the DRP has deleted this addition, the same is not the subject matter of this appeal and, therefore, we are not concerned with the same. 5. So far as outstanding receivable is concerned the DRP directed to use rate of interest at 4.53% i.e. 6 month libor + 400 basis points. So far as the adjustment on account of purchase of medical equipments is concerned the DRP held that the ALP and the WDV of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO has erred in initiating penalty proceedings under section 271 (1) (c ) of the Act as per the impugned order consequential to the above disallowances. 5. On the facts and in law, the Ld. AO erred in levying an interest of ₹ 1,26,297 under section 234 b of the Act. 7. The ground of appeal no.1 being general in nature is dismissed. 8. So far as the ground of appeal No.2 is concerned i.e. adjustment of ₹ 6,15,948/- on account of purchase of medical equipments, the Ld. Counsel for the assessee submitted that once the import of capital goods has been substantiated by way of furnishing the customs documentation (sample invoices along with corresponding bill of entries), the arm's length value of such goods cannot be limited to the value of customs duty and transportation cost only. He submitted that the equipment could not have been imported at NIL price in an independent scenario. He submitted that the TPO did not apply any method to benchmark the said transaction in violation of Rule 10B of the Income Tax Rules, 1962. Further the TPO did not provide any comparable data which would have suggested that the arm's length price for the purchase of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciate that during AY 2011-12, there were more 'outstanding payables' than 'outstanding receivables'. Furthermore, the average payment period to AEs is 176 days, whereas the average collection period from AEs is only 19.55 days. Thus no adverse inference is warranted on this account. He submitted that no interest has been charged from third parties- DHR India does not charge any interest from third parties on delay in payment. 11. Referring to the following decisions he submitted that interest is subsumed in working capital :- 1. Hon ble Delhi High Court in the case of Kusum Healthcare Private Limited (ITA No.765/2016) 2. Concentrix Daksh Services India Private Limited (In ITA No. 4453/Del/2019) 3. M/s. Barco Electronic Systems (P.) Ltd. (ITA No. 1530/Del/2016) 4. M/s. Target Sourcing Services India Private Limited Vs. ACIT ( ITA No.4132/Del/2017) 12. Referring to the decision of AVL India Private Limited in ITA No.4529/Del/2014 he submitted that the Tribunal in the said decision has held that the international transactions of trade receivables and trade payables with all the three AEs should be aggregated and processed as a single transaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed above, the ALP and the WDV for calculating depreciation, is limited to the customs duties paid and the cost of transportation of these assets. Depreciation is allowable only on the WDV so computed. The AO is directed to limit the depreciation allowed to the depreciation allowable on the WDV so computed. The ground is accordingly partly allowed. 17. It is the submission of the Ld. Counsel for the assessee that the TPO did not provide any comparable data and did not apply any method to bench mark the said transaction. It is also his submission that as per provision section 92 CA of the IT Act the TPO is required to determine the arms length price and not decided the allowability of transaction. Since the assessee in the instant case has not filed the purchase bills of these assets in the hands of its AE and as to whether the AE has sold these assets to the assessee at the same price at which they were purchased by the AE or with any mark up value, therefore, we are of the considered opinion that the contention of the assessee that the purchase of medical equipments are at ALP cannot be accepted. However, considering the totality of the facts of the case and in the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and recharacterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (2012) 345ITR 241 (Delhi). 12. Consequently, the Court is unable to find any error in the impugned order of the ITAT giving rise to any substantial question of law for determination. The appeal is, accordingly, dismissed. 19. We find in the impugned assessment year also working capital adjustment has been provided by the DRP for the services segment which already takes into account the impact of the outstanding receivables. Further in the impugned assessment year the outstandings payable are more than the outstandings receivable and average payment period to its AE is 176 days whereas the average collection period from its AE is only 19.55 days which is evident from page 331 of the paper book. Therefore, in our opinion, no adverse inference is warranted on account of receivables from the AE. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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