TMI Blog2021 (9) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in the order [ 2018 (5) TMI 946 - ITAT DELHI ] we hold that the adjustment in respect of royalty and commission cannot be sustained and the same shall be deleted. Interest on receivables - AO was of the opinion that any delay beyond the credit period shall be bench marked as an international transaction and by applying the same - AO calculated the interest chargeable on receivables by taking the credit period as 30 days and TPO suggested adjustment - HELD THAT:- It is not the case of the Revenue that even in respect of non-AEs also, the assessee is charging any interest. It is the policy of the assessee, as submitted that the assessee does not charge interest either from AEs or non-AEs and accordingly does not pay interest from AEs. Assessee demonstrated that as on 31.03.2016, a sum was receivable from AEs whereas the sum was payable by the assessee, resulting in net payable as per their books. There is nothing contrary to this averment made by the assessee with reference to the books. In Kusum Health Care Pvt. Ltd. [ 2017 (4) TMI 1254 - DELHI HIGH COURT ] We are of the considered opinion that the authorities below are not justified in making adjustment on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 045/- 2. Receipt of Commission 5,21,98,254/- 3. Interest on Receivables 9,91,253/- Total 5,41,06,552/- 4. According to the learned Assessing Officer, this amount of Rs.5,41,06,552/- is being proposed as an adjustment to the price shown by the taxpayer in its books of account, and has to be treated as the cumulative adjustment u/s 92CA of the Act. 5. Assessee filed objections before the ld. DRP and submitted that in so far as the royalty is concerned, the assessee is engaged in the business of trading and manufacturing of chemicals; that the company pays royalty for the non-exclusive license to manufacture, sell and use the trademark Novacote in India; and that since the profitability from payment of royalty is inter-linked with other transactions in its chemical business, the same was benchmarked within the business activities using Transaction Net Margin Method (TNMM). So also the assessee submitted that in respect of the commission, it constitutes around 0.42% of the total revenue of the assessee whereas 99.58% of the income is from the trading of chemicals, whereas a perusal of the quantum of such sales makes it clear that such sales are not undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee does not commensurate to the business of assessee then there are separate and distinct provisions of the Act, under which the Assessing Officer can make appropriate disallowances; that the TPO cannot enter into the merits of the claim of the expenditure vis a vis the business needs of the assessee and his domain is restricted to the determination of Arm s Length Price only. 9. Learned DR places reliance on the orders of the authorities below and submitted that the contentions of the assessee are against the ordinary conduct of business and, therefore, authorities rightly rejected the same. Learned DR sought remand of this matter to the file of ld. TPO for verification of the facts and justification of the expenses or the reduction of the commission rate. 10. We have gone through the record in the light of submissions made on either side. In so far as the TP adjustments in respect of the royalty and commission are concerned, it remains an admitted fact that the issues are covered by the order dated 07.05.2018 in ITA No. 7260/Del/2017 in assessee s own case for the assessment year 2013-14 passed by a coordinate Bench of this Tribunal. As referred to earlier, the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer was of the opinion that any delay beyond the credit period shall be bench marked as an international transaction and by applying the same, the Assessing Officer calculated the interest chargeable on receivables by taking the credit period as 30 days and the ld. TPO suggested adjustment of Rs.9,91,252/-. 15. On this aspect, the case of the assessee is that the assessee does not charge any interest receivable by them from the AEs and it is their policy not to charge so in respect of interest both payable and receivable. It is further submitted that the interest payable by the assessee is more than the interest receivable and such interest on receivables is ingrained in sales itself, and the ld. Assessing Officer took into consideration only the interest chargeable, but did not consider the interest payable and if both the interest chargeable and interest payable are taken into consideration and set off is allowed, that would lead to no adjustment at all. 16. Learned AR drew our attention to page No. 416 of the appeal set where the assessee demonstrated that the related party receivables of the assessee as on 31.03.2016 were Rs.4,79,88,545/-, whereas related par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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