TMI Blog2022 (11) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... MEMBER This appeal by assessee is directed against assessment order passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income-tax Act, 1961 ['the Act'] dated 15.7.2022 for the assessment year 2018-19 which was passed in consequent to directions of the Ld. DRP dated 16.6.22 u/s 144C(5) of the Act for the assessment year 2018-19. 2. Facts of the case are that Cisco Systems Capital (India) Private Limited ('Cisco Capital' or the Assessee') is an Indian company incorporated under the provisions of Companies Act, 1956 and is registered as a Non- Banking Financial Company ('NBFC') with the Reserve Bank of India. Cisco Capital is responsible for providing end-to-end financial solutions to the customers of Cisco in India by a variety of financing options. 3. For the AY 2018-19, the Assessee filed the return of income on November 30, 2018, wherein the Assessee had disclosed INR 432,49,59,140 as total income [(under the normal provisions of the Income Tax Act, 1961 and was liable to pay income tax amounting to INR 149,67,81,859 (including surcharge and education cess). Post availing tax credit under Section 115JAA of the Act [Minimum Alternate Tax (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied domestic transaction, not considering amendment made by Finance Act - 2017 1. The learned AO/TPO has erred in law and fact, by initiating scrutiny proceedings in relation to the specified domestic transaction of payment made by the Appellant towards the fees for administrative support services to the AE. disregarding the deletion of clause (i) of section 92BA of the Act by virtue of amendment by the Finance Act, 2017 w.e.f April 1, 2017. Transfer pricing adjustment on account of recharacterization of payment made for administration support services Treating payment for administrative support services to Cisco Systems India Private Limited ('Cisco India') as an International transaction 2. The learned TPO/AO has failed to appreciate the fact that the agreement between Cisco Capital and Cisco India for availing of administrative support services (which was in the nature of outsourcing of services to Cisco India or deputation services by Cisco India to Cisco Capital) is bona-fide arrangement and the same cannot be treated as an international transaction under section 92B of the Act. Alleging that Appellant has an arrangement with Cisco India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of benchmarking analysis undertaken by Appellant 9. Without prejudice to the other grounds, the learned AO/TPO have erred. in law and in fact by a. not appreciating the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with Income Tax Rules, 1962, b. rejecting the transfer pricing approach identified by the Appellant in its transfer pricing documentation report maintained, c. conducting a fresh economic analysis for identification of comparables (with unreasonable comparability criteria) and determining of the ALP in connection with the impugned specified domestic transaction. Rejection of Non-comparable companies 10. Without prejudice, the learned TPO/ AO has erred. in law and in fact. by selecting certain companies as comparable companies ignoring the fact that the companies are functionally different: a) Pressman Advertising Limited b) Axience Consulting Private Limited c) Cheil India Private Limited d) Dun Bradstreet Information Services India Private Limited e) Majestic Research Service and Solutions Limited 11. Without prejudice, the learned TPO/ AO has erred, in law and on facts. in erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar issue came for consideration before this Tribunal in assessee s own case for the assessment year 2016-17 in IT(TP)A No.309/Bang/2021 dated 8.11.2021 held as under:- 18. By ground No.9, the assessee grievance is bundled approach for benchmarking should be accepted. At the outset, the ld. AR submitted that the TPO has accepted the bundled approach of aggregation of payment of fees for administrative support services in the preceding years (i.e. from the incorporation year to AY 2015-16). Also, the Tribunal in its order passed for the AY 2015-16 dated April 8, 2021 has accepted the bundled transaction approach adopted by the Assessee. There has been no change in the functions, assets and risk analysis in the current year vis-a-vis preceding years. In this context, the Assessee submits that the rejection of the consistent approach adopted by the Assessee which has been accepted by the TPO in preceding years is incorrect. Given the fact that primary transaction of purchase of networking equipment for lease has been considered at arm's length, the claim of the TPO that the impugned specified domestic transaction should be separately benchmarked is erroneous and unjustified. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of administrative and marketing support services is part of the operating cost and no separate adjustment is warranted. These grounds of assessee are partly allowed for statistical purposes. 14. Respectfully following the above decision of the coordinate bench, we hold that the issue of administrative and marketing support services is part of the operating cost and no separate adjustment is warranted. 15. Ground no.6 pertains the contention that the bundled approach for bench marking should be accepted and the same is adjudicated in the aforesaid paragraphs. Therefore the rest of the grounds i.e. Grounds 1 to 5 and Ground 7 to 12 have become academic and does not warrant separate adjudication. 2. Ground no.13 and 14 are with regard to the interest charged on outstanding receivable. The grounds read as under 13. Without prejudice, the learned TPO/ AO has erred. in law and on facts, by determining a transfer pricing adjustment on account of interest on outstanding receivables, not appreciating the fact that such receivables are arising from rebates and discounts offered by CSI BV and should not be tested separately or re-characterized as a loan transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for A.Y. 2014-15 and in paras 23 to 23.9 of the order dated 21-5-2020 this Tribunal held as under : 23. Ground Nos. 14-17 alleged by assessee against adjustment of notional interest on outstanding receivables. From TP study, it is observed that payments to assessee are not contingent upon payment received by AEs from their respective customers. Further Ld.AR submitted that working capital adjustment undertaken by assessee includes the adjustment regarding the receivables and thus receivables arising out of such transaction have already been accounted for. Alternatively, he submitted that working capital subsumes sundry creditors and therefore separate addition is not called for. 23.1 Ld.TPO computed interest on outstanding receivables under weighted average method using LIBOR + 300 basis points applicable for year under consideration that worked out to 3.3758% on receivables that exceeded 30 days. It has been argued by Ld.AR that authorities below disregarded business/commercial arrangement between the assessee and its AE's, by holding outstanding receivables to be an independent international transaction. 23.2 Ld.AR placed reliance on decision of Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT v. Patni Computer Systems Ltd. [2013] 33 taxmann.com 3/215 Taxman 108 (Bom.), which dealt with question of law: (c) Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case-to-case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. v. DCIT [2017] 398 ITR 120 (Del.). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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