TMI Blog2022 (1) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... same price, in the same year, cannot be held to be at arm's length for trading goods and not at arm's length for capitalised goods at the same time and in the same breath. Considering the facts of the case in totality, we direct the Assessing Officer to allow the claim of depreciation on the purchase of fixed sub grounds is, accordingly, allowed. Adjustment towards interest on outstanding receivables - delay in receivables from the AE - HELD THAT:- The reason for delay in receiving outstanding invoices has to be looked into. Further, it has been submitted before us that as a matter of principle, the assessee has not charged interest on outstanding receivables, either from AE or non AE. This fact has not been factually examined, either by the TPO or learned DRP. It has to be ascertained, what is the average delay in case of AE and non AE transactions. Similarly, assessee's contention that on outstanding payables to the AE no interest has been charged, requires to be considered and, in case, there are outstanding payables, it has to be set off against outstanding receivables and interest has to be charged on net receivables. As regards, the contention of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution Panel (DRP). 2. Ground no. 1, being of general nature, does not require specific adjudication. 3. In ground no. 2, the assessee has challenged adjustment of ₹ 77,04,297 made to the international transaction relating to purchase of medical equipments. 4. Briefly the facts are, the assessee, a resident company, is incorporated in the year 2007 and is engaged in the business of trading in various medical equipments and other products. During the previous year relevant to the assessment year under dispute, the assessee entered into international transaction with its overseas Associated Enterprise (AE) of providing business support services and marketing support services. In course of its business of trading, the assessee had imported medical equipments for resale to third parties. The medical equipments and consumables traded by the assessee are, basically, blood gas analysers and consumables. As per the business model adopted by the assessee, it buys analysers and sales them to third parties, i.e., hospitals, medical institutions etc. and books the revenue in the trading segment. However, in some instances, when the customer is not willing to buy the equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered rival submissions and perused the materials on record, we find that identical dispute arising in assessee's own case in assessment year 2012-13 came up for consideration before the Tribunal. While deciding the issue in the order referred to above, the Tribunal has held as under: 28. Facts on record show that the assessee is also engaged in the business of trading of medical equipment i.e. blood gas analysers and consumables. We find that the assessee Appellant follows a unique business model wherein the assessee buys analysers and sells them to third parties i.e. hospitals, medical institutions etc, books the revenue under the trading segment. On the other hand, if the customer is not willing to buy the analysers, such instruments were installed at the customer's premises and the consumables required by the customer in using these instruments were provided by the assessee. We find that the cost of such analysers imported from the AEs, were capitalized in the books of accounts of the assessee and its related operating cost, i.e. depreciation, has been charged to the profit and loss account while computing the profitability of the trading segment. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's own case, as referred to above, we delete the adjustment of ₹ 77,04,297/-. Ground is allowed. 10. In ground no. 3 with its sub-grounds, the assessee has challenged the adjustment of ₹ 2,47,088/- towards interest on outstanding receivables. 11. Briefly the facts are, in course of transfer pricing proceeding, the TPO noticed that there is considerable delay in realization of invoices raised on the AE. Therefore, he called upon the assessee to explain, as to why the outstanding receivables should not be treated as unsecured loan to the AE and interest should not be charged. Though, the assessee objected to the proposed action of the TPO by submitting that the delay in outstanding receivables cannot be treated as international transaction and no interest can be charged by treating it as unsecured loan, however, the TPO was unconvinced. He held that after amendment to section 92B by Finance Act, 2012 w.e.f. 01.04.2002, the delay in outstanding receivables would fall within the definition of international transaction. Having held so, the TPO proceeded to compute interest on receivables remaining outstanding beyond the period of 30 days by applying SBI pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as an international transaction. Therefore, the reason for delay in receiving outstanding invoices has to be looked into. Further, it has been submitted before us that as a matter of principle, the assessee has not charged interest on outstanding receivables, either from AE or non AE. This fact has not been factually examined, either by the TPO or learned DRP. It has to be ascertained, what is the average delay in case of AE and non AE transactions. Similarly, assessee's contention that on outstanding payables to the AE no interest has been charged, requires to be considered and, in case, there are outstanding payables, it has to be set off against outstanding receivables and interest has to be charged on net receivables. As regards, the contention of the assessee that working capital adjustment subsumes outstanding receivables, in our view, this may be correct in so far as receivables remaining outstanding at the end of the year. However, the invoices raised and realized during the year, but, beyond the credit period cannot get subsumed in the working capital adjustment. Since, all these factors have not been considered by the Departmental Authorities, we are inclined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cost to cost basis. Similarly, certain expenses incurred by the AE on behalf of the assessee, have also been reimbursed on cost to cost basis. Learned counsel for the assessee has demonstrated before us that invoices towards the cost incurred have been raised on back to back basis on the AE. Thus, in our view, there is no need to charge any mark-up on such reimbursement of expenses, more so, when the AE is not charging any mark-up on the cost incurred by it on behalf of the assessee. In view of the aforesaid, we delete the adjustment of ₹ 36,83,982/-. Ground is allowed. 21. In ground no. 5, the assessee has challenged non-grant of set-off of brought forward unabsorbed depreciation against the addition made to the total income on account of transfer pricing adjustment. 22. Before us, it is a common point between the parties that a direction needs to be issued to the Assessing Officer to grant consequential relief to the assessee depending upon the decision to be taken in the preceding assessment years. In view of the aforesaid, we direct the Assessing Officer to grant set-off of brought forward unabsorbed depreciation after the issue is crystallized in the preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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