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TMI Blog2020 (11) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 2376/Hyd/2018 for A.Y.2014-15. The identical issue is involved in all these assessee appeals and hence they are taken up together and disposed off by this common order for the sake of convenience. 2. The first identical issue involved in all these appeals is as to whether the ld. DRP was justified in treating outstanding receivables from AEs as a separate international transaction and making adjustment by way of imputation of interest thereon. 3. We have heard rival submissions and perused the materials available on record. The assessee company is engaged in the business of providing research services in the field of medicinal chemistry. Even though the common issue involved in all the assessment years i.e.2010- 11 to 2014-15 in assessee appeals, is with regard to transfer pricing adjustment of imputing notional interest on outstanding receivables, they have got very minor variation with regard to treatment given by the ld. TPO and the ld. DRP for the same for each of the assessment years. The entire proceedings before the ld. TPO for each of the assessment could be summarised in the following tabular form: Particulars AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Lumpsum outstanding receivables amount Invoice by invoice (partial relief. Not given effect by Ld. AO/ TPO) Invoice by invoice (partial relief) Invoice by invoice Restricted interest up to 31 March of FY No Yes (partial relief. Not given effect by Ld. AO/ TPO) Yes (partial relief. Not given effect by Ld. AO/ TPO) Yes (partial relief) Yes Credit period 30 days Not provided 30 days (partial relief) 15 days 30 days Interest rate LIBOR + 200 basis points (partial relief) 5% (partial relief) SBI Term deposit rates (partial relief. Not given effect by Ld. AO/ TPO) SBI Term deposit rates (partial relief) SBI Term deposit rates Payables netted off against outstanding receivables No Yes (partial relief. Not given effect by Ld. AO/ TPO) No No No Adjustment amount (INR) 1,59,31,542 2,30,37,364 9,60,38,036 3,38,52,968 3,16,63,391 3.4. The main essence of the arguments advanced by the ld. AR could be summarised as under:- a. The assessee company has got a consistent policy for not charging any interest on outstanding receivables from its AEs and also not paying any interest on outstanding payables to its AEs. The ld. AR pleaded that the trade payables to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reliance on the following decisions which supported same contentions:- * Decision of Hyderabad Tribunal in the case of Ivy ComptechPvt. Ltd., vs DCIT in ITA No.1403/Hyd/2016 dated 31/01/2019 * Decision of Mumbai Tribunal in the case of Jewel Mark India Pvt. Ltd., vs ITO in ITA No.431 & 582/Mum/2014 dated 15/04/2015. c. The assessee has not been charging any interest on its outstanding receivables from both AEs as well as non-AEs and in this regard heavy reliance was placed on the decision of the Hon‟ble Bombay High Court in the case of CIT vs. Indo American Jewellery Ltd., reported in 223 Taxman 8 wherein it was held that there was complete uniformity in the act of assessee not charging the interest from AE as well as non-AE for delay in realisation of export proceeds, then no adjustment could be made towards interest on delayed realisation of sundry debtors in the course of TP proceedings. Apart from that ,the ld. AR also placed reliance on the following decisions:- * Unilever India Exports Ltd. (ITA No. 2096/Mum/2017) dated 31/07/2019 * Suashish Diamonds Ltd (ITA No. 7058, 7508/Mum/2014) dated 31/05/2019 * Mastek Limited (ITA No. 3120/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amendment is required to be read as prospective, the Tribunal cannot do so as it is a creature of the Income Tax Act itself. In our considered view, and for the detailed reasons set out above, at best the amendment in Section 92B, at least to the extent it dealt with the question of interest on delayed realization of debtors, is effective from 1st April 2012. The assessment year before us being an assessment year prior to that date, the amended provisions of Section 92 B have no application in the matter. 5.1. Respectively following the aforesaid judicial precedent, we hold that no transfer pricing adjustment could be made on outstanding receivables by way of imputation of notional interest for A.Yrs. 2010-11, 2011-12 and 2012-13 as they do not fall under the category of international transaction for those years. 5.2. In view of our aforesaid decision, the arguments advanced by the ld. AR and the ld. DR need to be looked into only for A.Yrs. 2013-14 and 2014-15 before us. At the cost of repetition, the following primary facts which remain undisputed before us are relevant:- a. Assessee has realised its receivables from its AE after a considerable period of delay ranging fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d receivables, we find that assessee is only a captive service provider to AEs and does not have non-AEs at all. Hence, the policy of the assessee that no interest is charged for both AEs as well as non-AEs would not advance the case of the assessee. With regard to reliance placed in this regard on the decision of Hon‟ble Bombay High Court in the case of CIT vs. Indo American Jewellery Ltd., reported in 223 Taxman 8 together with Mumbai Tribunal decision in the case of Unilever India Exports Ltd. (ITA No. 2096/Mum/2017) dated 31/07/2019; Suashish Diamonds Ltd (ITA No. 7058, 7508/Mum/2014) dated 31/05/2019; Lintas India Private Limited (ITA No 2024/Mum/2007) dated 09/11/2012) and the decision of Ahmedabad Tribunal in Mastek Limited (ITA No. 3120/Ahd/2010) dated 29/02/2012, the same does not come to the rescue of the assessee as in all these cases, the assessee had transactions with AEs as well as non-AEs and consistently assessee had not charged interest from both. Whereas in the instant case before us, the assessee , being a captive service provider does services only to its AEs. Hence, we hold that the aforesaid cases are factually distinguishable with that of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute that working capital adjustment had indeed been granted by ld. TPO to the assessee for A.Y.2013-14 and 2014-15. Infact, there is also an exclusive discussion made by the ld. DRP in para 2.1.12 of its order regarding the same for A.Y. 2014-15. Hence, by applying the ratio of the Hon‟ble Delhi High Court in the case of Kusum Healthcare referred to supra, no imputation of interest on outstanding receivables could be made thereon for both the years. However, in respect of invoices raised in earlier years, where the amounts were realized during the year under consideration but beyond the agreed credit period, imputation of interest by applying LIBOR + 200 basis points is to be made from 1st day of April of the relevant years till the date of realization of debts. In respect of invoices raised during the respective years, where the amounts were realized during the respective years itself, but beyond the agreed credit period, imputation of interest by applying LIBOR +200 basis points is to be made from the date of expiry of agreed credit period from the date of raising the invoice and the same is to be charged till the date of realization of debts. We hold that the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on its AEs, where the amounts were realized during the year under consideration but beyond the agreed credit period, imputation of interest is to be made from first day of April or from the expiry of the agreed credit period (i.e 30 days as accepted by ld DRP) whichever is later till the date of realization of debts. b. In respect of invoices raised during the year on its AEs, where the amounts were realized during the year itself but beyond the agreed credit period, imputation of interest is to be made from the date of expiry of agreed credit period till the date of realization of debts. 5.10. Accordingly, the grounds raised by the assessee for A.Yrs. 2013-14 and 2014-15 with regard to transfer pricing adjustment made on account of imputation of interest on outstanding receivables from AEs are disposed off in the aforesaid manner. 6. The Ground No.3 raised for A.Y.2014-15 by the assessee is with regard to determination of ALP @5% of reimbursement from AE. The assessee has raised the following grounds in this regard:- a. Marking up@5% on the expenses being the travel cost of deputed employees paid on behalf of AE and recovered the same at cost from AEs as related to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision rendered earlier in this regard would apply for additional grounds also. 12. The ground Nos. 4 & 5 raised by the assessee for A.Y.2012-13 are with regard to chargeability of interest u/s.234B and 234C of the Act which are consequential in nature. 13. The ground No.3 raised by the assessee for A.Y. 13-14 is for seeking TDS credit of Rs. 826366/-. We direct the ld. AO to verify the eligibility of the assessee in this regard. The ld. AO should verify the supporting evidences and grant the TDS credit as per law. 14. The ground No.4 raised by the assessee for A.Y.2013-14 is with regard to chargeability of interest u/s.234B of the Act which is consequential in nature. ITA No. 333/Hyd/2015 (AY 2010-11) - Revenue Appeal 15. The first ground raised by the revenue for A.Yr 2010-11 is challenging the direction of the ld. DRP to adopt mark-up of 10% on the reimbursement received by the assessee from AEs. We find that the ld. TPO had adopted on adhoc basis of 10% mark-up on reimbursement from AEs which was reduced by the ld. DRP to 5%. We have already held in assessee‟s appeal in respect of this issue that assessee had not provided any further details to prove that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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