TMI Blog2023 (12) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 14A of the Act was unwarranted. Adjustments on account of delay in realization of receivables - Tribunal accepted the claim of the respondent/assessee that it being a debt free company, no adjustment on account of notional interest on receivables was warranted in view of an earlier decision of a coordinate bench of the Tribunal - HELD THAT:- This issue stands clearly covered by the decision of a coordinate bench of this court in the case of PCIT vs Boeing India (P) Ltd [ 2022 (10) TMI 498 - DELHI HIGH COURT] in which after traversing through various judicial precedents, the court held that the assessee company being a debt free company the question of receiving any interest on receivables did not arise so the adjustment made by the Assessing Officer on account of interest on outstanding receivables was liable to be deleted. TP Adjustment - comparable selection - rejection of Accentia Technologies Ltd and TCS E-Serve Ltd - HELD THAT:- The issue stands covered by earlier decisions of this court in the cases PCIT vs Inductis India (P) Ltd [ 2019 (2) TMI 1745 - DELHI HIGH COURT] AND B.C. MANAGEMENT SERVICES PVT. LTD. [ 2017 (12) TMI 255 - DELHI HIGH COURT] wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f payment as agreed under the contract with the AE is legally an international transaction under sub-clause (c) of clause (i) of Explanation below Section 92B of the Act requiring determination of Arm s Length Price? 2.5 Whether the Ld. ITAT erred in excluding TCS E-Serve Ltd. from the list of comparables especially when the authorities below had established functional similarity of the comparable? 2.6 Whether the Ld. ITAT erred in excluding Accentia Technologies Ltd. from the list of comparables especially when the authorities below had established functional similarity of the comparable? 3. Succinctly stated, circumstances relevant for present purposes are as follows. 3.1 The respondent/assessee being a wholly owned subsidiary of ExlService Mauritius Ltd (which in turn is a subsidiary of ExlServices holdings Inc. US) was engaged in providing IT enabled back office research and data analytics services to its associated establishments (AE) and filed its return of income on 29.11.2012 declaring its total income as Rs. 16,42,41,218/-. 3.2 The case of the respondent/assessee was selected for scrutiny assessment and notice under Section 143(2) of the Act was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer and upheld the disallowance of expenses under Section 14A of the Act. 3.7 Accordingly, the Assessing Officer passed Final Assessment Order dated 28.12.2016, thereby making an addition of Rs. 16,79,45,649/- to the income of the respondent/assessee. 3.8 On 11.01.2017, the TPO passed rectification order under Section 154 of the Act correcting the adjustment on account of provisions of IT enabled services, thereby bringing down the TP adjustment on ALP to Rs. 8,61,13,970/-. 3.9 The respondent/assessee filed appeal before the Tribunal, which was allowed, holding that the respondent/assessee being a debt free company, adjustment on account of interest on receivables was not sustainable in the eyes of law; that since segmental data pertaining to Accentia Technologies Ltd was not available and the other company TCS E-Serve Ltd had earlier also been excluded on account of high turnover, large scale operations, high brand value and the nature of services, both comparables were liable to be rejected from list of comparables chosen by TPO; and that for the year under consideration, the respondent/assessee was a debt free company, so no interest bearing borrowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law for present purposes. 6. As regards the proposed questions 2.3 and 2.4 pertaining to adjustments on account of delay in realization of receivables, the DRP held that in view of explanation (i)(c) to Section 92B of the Act, deferred receivables from AE is an international transaction and that aggregation of transaction is possible only when the transactions are continuous and closed linked but the respondent/assessee had failed to discharge its onus to establish that the transaction of outstanding receivables was not a separate transactions and no separate adjustment on that account was warranted; and that the respondent/assessee had failed to establish that delay in payment of receivables was compensated by AE through a set off. 6.1 In the impugned order, the Tribunal accepted the claim of the respondent/assessee that it being a debt free company, no adjustment on account of notional interest on receivables was warranted in view of an earlier decision of a coordinate bench of the Tribunal. On this aspect, learned counsel for appellant/revenue contended that the Tribunal fell in error by blindly following the decision of the its coordinate bench in the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Income-tax Appellate Tribunal noted that the assessee had undertaken working capital adjustment for the comparable companies selected in its transfer pricing report. It was further noted that the differential impact of working capital of the assessee vis-a-vis its comparables had already been factored in the pricing/profitability which was more than the working capital adjusted margin of the comparables and, therefore, any further adjustment to the margins of the assessee on the pretext of outstanding receivables is unwarranted and wholly unjustified . 10. The court is unable to agree with the above submissions. The inclusion in the Explanation to section 92B of the Act of the expression receivables does not mean that dehors the context every item of receivables appearing in the accounts of an entity, which may have dealings with foreign associated enterprises would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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