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TMI Blog2023 (10) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 144C(13) and read with sections 144B of the Income-tax Act, 1961 ("the Act"), is a vitiated order having been passed in violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and is void ab-initio. TP adjustment in relation to availing of technical services segment ("TSS") [INR 11.86.43.290] 2.1 That on the facts of the case and in law, the Ld. AO/Ld. TPO have erred, in recharacterizing the functional profile of the Appellant as technical support service provider instead of re-seller of services/ solutions as characterized by the Appellant in the TP documentation. While doing so, the Ld. AO/Ld. TPO has not taken cognizance of intercompany agreement and analysis undertaken under TP documentation wherein it is established that Appellant is a re-seller of services/ solutions in respect of availing of technical services. That on the facts of the case and in law, the Hon'ble DRP have erred, in not adjudicating on characterization of functional profile of the Appellant under TSS. That on the facts of the case and in law, the Ld. AO/Ld. TPO/Hon'ble DRP have erred, by applying employee cost greater than 25 percent of revenue as a comparability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta for these companies is not available. TP adjustment in relation to provision of marketing support services [INR 2.93.34.270] 3.1 That on the fact of the case and in law, the Ld. AO/TPO/Hon'ble DRP has erred by not/accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ('the Rules'), and conducting a fresh economic analysis for the determination of the ALP of the Appellant's international transaction pertaining to provision of marketing support services and holding that the said international transaction is not at an arm's length without sharing the detailed accept reject matrix for selection or rejection of companies evaluated by him. 3.2 That on the facts of the case and in law, the Ld. AO/Ld. TPO/Hon'ble DRP have erred, by wrongfully rejecting comparable companies from the final set of comparable companies for the purpose of determining the ALP of the subject international transaction on an ad- hoc basis, thereby resorting to cherry picking of comparable companies. 3.2.1 That on the facts of the case and in law, the Ld. TPO, in particular, erred in non-complying with the directions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein no interest is charged on overdue receivable by the Appellant. 4.6 That on the facts of the case and in law, the Ld. TPO/Hon'ble DRP have erred in determining the arm's length interest rate for inter-company receivables at LIBOR plus 400 basis points on an arbitrary basis without any cogent reasons. 4.7 That on the facts of the case and in law, the Ld. TPO/Hon'ble DRP have erred in granting the credit of period of 60 days instead of 90 days having regard to the provisions of Section 92CE of the Act. 4.8 That on the facts of the case and in law, the Ld. TPO/Hon'ble DRP have erred, by not appreciating that Appellant has earned more than arm's length return in its other segments, and such excess remuneration should be "set off' with the proposed adjustment. Other Grounds 5. That on the facts of the case and in law, the Ld. TPO/Hon'ble DRP have erred, by treating foreign exchange gain/ loss as nonoperating item while determining the ALP of the international transactions. Initiation of penalty proceedings 6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. The abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the DRP, the Ld. A.O vide order dated 25/03/2022 passed the final assessment order u/s 143 (3) of the Act read with Section 144C (13) of the Act read with Section 144B of the Act by making TP Adjustment of Rs. 16,54,20,675/- by computing the taxable income of the assessee at Rs. 113,02,37,005/-as against the income admitted by the assessee at Rs. 96,48,16,330/-. 5. Aggrieved by the final assessment order dated 25/03/2022, the assessee has preferred the present appeal on the grounds mentioned above. 6. The Ld. Counsel for the assessee submitted that, Ground No. 1 is general in nature, which requires no adjudication. The Ground No. 2.1 & 2.4 are in respect of transfer pricing adjustment in relation to technical support services segment. Further submitted the Ground No. 3.1 & 3.2 are in respect of TP Adjustment in relation to provision of marketing support services segment. The above said impugned additions mentioned in Grounds No. 2.1 & 2.4 and 3.1 & 3.2 have been deleted by the TPO vide rectification order dated 19/04/2022 therefore, submitted that the Grounds No. 2.1 & 2. 4 and 3.1 & 3.2 have become in-fructuous. The said rectification order has been found by us at Page 594-60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notional interest on receivables. 8. The TPO after examination of the balance sheet found that the assessee has not received the payments for the invoices raised by the assessee within the stipulated time as provided in the service agreement with the AE's. The TPO held that the delayed payments are being treated as unsecured loans advanced to the AE and charged interest @ 12.51% (6 months LIBOR plus 400 basic point for computing notional interest) for the delayed period. The Id. DRP held that the TPO action cannot be faulted with relying on the judgment of Hon'ble Delhi High Court in the case of CIT Vs Cotton Naturals India Pvt. Ltd. 55 Taxman 401 and the order of the ITAT in BECHTEL India Pvt. Ltd. Vs ACOT 84 Taxman 121 for the assessment year 2012-13. 9. Before us, the Id. AR argued that re-characterizing the overdue receivables as unsecured loans extended by the assessee to it's AE is an erroneous belief which cannot be held to be correct. He relied on the orders of the Tribunal in assessee's own case for the assessment years 2014-15 and 2015-16. 10. In all these years, the assessee is found to be a debt free company and there is no dispute on these facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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