TMI Blog2024 (3) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... e statistics over a period of time and to find out a pattern intended to benefit its AE In the case of Apache Footwear India Pvt. Ltd 2023 (4) TMI 521 - ITAT HYDERABAD] Tribunal concluded that interest on outstanding receivables from the AE is required to be separately benchmarked and interest should be charged on the delayed period @ 6% on the receivables. We also make it clear that interest cannot be charged on each and every receivable and has to be examined on case to case basis and the TPO has to enquire and analyze the statistics over a period of time to discern a pattern to come to a conclusion that the arrangement reflects an international transaction. The AO has to examine the transactions of similar in nature with non-AEs to come to a conclusion to charge interest and also to determine the basis of interest to be charged. We have also examined the order in the case of Orange Business Services India Solutions (P.) Ltd. [ 2022 (12) TMI 1070 - ITAT DELHI] and also the order of the Tribunal for the earlier years. Each year has to be looked into separately based on the facts of the each case. In this case, the inter company services agreement provides for charging of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the international transaction of export of finished goods to AEs. 5. Without prejudice to above grounds, that on the facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO exceeded his jurisdiction in re-characterizing the trade receivables of the Assessee from its AEs as unsecured loans advanced to AEs and Hon'ble DRP erred in confirming the same, thereby, penalizing the Assessee for not undertaking its business in a particular manner. 6. Without prejudice to above grounds, the Ld. AO/ Ld. TPO/Hon'ble DRP erred in ignoring that the Assessee had common policy of not charging interest on any delay of payment from either AEs or third parties and had also not paid any interest to its AEs for outstanding payables. 7. Without prejudice to above grounds, the Ld. AO/ Ld. TPO / Hon'ble DRP erred in not giving set-off for receivables cleared by AEs in less than 30 days or received in advance. 8. Without prejudice to above grounds, that on the facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO / Hon'ble DRP erred in determination of arm's length price based on inappropriate and unlawful application of the Comparable Uncontrolled Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the total income of the Assessee at Rs. 86,01,50,040/- which was objected before the ld. DRP by the assessee. Proceedings before the Ld. Dispute Resolution Panel ('DRP') 8. With respect to interest on outstanding receivables, the Panel upheld the action of the TPO/AO in treating outstanding receivables of the Assessee as an unsecured loan advanced to its AEs and in turn, a separate international transaction and further extended the credit period to 60 days as opposed to 30 days proposed by the TPO. Further, no relief was granted by the Ld. DRP on the interest rate charged on such outstanding receivables as proposed by the TPO. However, with respect to the short credit period i.e., mere 30 days, granted by the TPO to the Assessee, the Ld. DRP directed the TPO to consider a credit period of 60 days while re-computing the interest on such receivables. 8. In line with the ld. DRP Directions and the Appeal Effect Order, the Assessing Officer thereafter passed the final assessment order, incorporating the revised TP adjustment and made addition to the Assessee's income of Rs. 5,36,99,972/- on account of interest receivable. 9. Aggrieved by the final assessment order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds that the entire focus of the AO was on just one AY and the figure of receivables in relation to that AY can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis- -vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterized the transaction. This was clearly impermissible in law as explained by this Court in CIT vs. EKL Appliances Ltd. (2012) 345 ITR 241 (Delhi). 12. Consequently, the Court is unable to find any error in the impugned order of the ITAT giving rise to any substantial question of law for determination. The appeal is, accordingly, dismissed. 13. Further reliance is placed by the ld. AR on the following decisions wherein similar observations were made: Convergys India Services Pvt. Ltd. vs. ACIT (ITA No. 4370/Del/2019) Target Sourcing Services India (P.) Ltd. vs. ACIT ([2020] 114 taxmann.com 701 (Delhi - Trib.)) Redtech Network I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale transaction as a separate international transaction warranting any further adjustment. One may also contend that the expression any other transaction having a bearing on the profits, income, losses.....' as employed in sec. 92B defining international transaction would encompass such interest from sale as the non-receipt of due interest would have the effect on profits or income. This contention also does not merit acceptance because when 'sale' and 'lending money' have been specifically included in definition of international transaction' u/s 92B, then the expression any other transaction' used in the later part of this provision will exclude all the items separately covered. In this view of the matter, it becomes manifest that there can be no separate international transaction of interest income which is part of the transaction of sale. Once ALP is determined in respect of the sale transaction, it would be deemed to be covering all the elements and consequences of the transaction of sale. Having determined ALP in a sale transaction, it cannot be accepted that separate adjustment de hors such determination is required in respect of interest. PCIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the arm's length credit period is on an ad hoc basis and not the result of any comparability analysis undertaken by the Ld. DRP or any industry benchmark. Further, no economic or commercial rationale for using a credit period of 60 days has been provided by the Ld. DRP. 23. On the other hand, the ld. DR relied on the following cases: (a) Swiss Re Global Business Solutions India (P.) Ltd. vs. Addl./Jt./Dy./ Assistant Commissioner of Incometax/Income-tax Officer, (NFAC) Delhi taxmann.com 417 (Bangalore - Trib.) [2022] 137 (b) Maxim Integrated Products India Sales Pvt. Ltd. v. DCIT (2022) 140 taxmann.com 578 (Bangalore-Trib.). 24. The submission of the ld. DR is as under: The ld. DR argued that in both the above cases, the assessee have taken the ground that the interest on receivables is subsumed in the working capital adjustment and there is no requirement for separate adjustment. Further the assessee has also taken the ground that TPO/DRP allowed the working capital adjustment on other transactions and that adjustment subsumes the interest on receivables and there is no requirement for separate additions on account of interest on outstanding receivables. Further in all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of benchmarking the transaction is to ascertain whether assessee, who is similarly situated, would render the same kind of services at the same or similar price to a third party or not. If we examine the issue in the above-said context, it would be clear that the assessee would charge bank interest or any other interest with a find any error in the same. view to compensate itself on account of delay in making the payment. Hence, we do not find any error in the same. 13. The reliance of the assessee in the case of Betchel India (P.) Ltd. (supra) is also not correct as A.Y. in that case was 2010-11. By the Finance Act, 2012, the Explanation was inserted in Sec.92B of the Act and by virtue of which payment or deferred payment or receivable or any other debt arising during the course of business has been considered to be an international transaction which is required to be benchmarked. Following the above said Explanation, the co-ordinate Bench for the subsequent assessment years vide order dt.16-5-2017 in the case of Bechtel India (P.) Ltd. v. Asstt. CIT [2017] 85 taxmann.com 121 (Delhi - Trib.) had decided the issue against the assessee. In view of the above, the decision relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be separately computed for outstanding receivables. 4. Whether the assessee is a debt free company or not is immaterial as TPO is required to examine whether the Indian entity/assessee had supplied the products/ services to its AEs at ALP or not. Further being debt free does not mean that it can allow its funds to be utilized by AE for indefinite period of time. 5. As explained in above noted paras, the decision of the Hon'ble Delhi High Court in the case of Kusum Healthcare has been distinguished by several Tribunals including Delhi Tribunal. 25. Heard the arguments of both the parties and perused the material available on record. 26. We have examined the provisions of the Act and judgments on this issue. 27. As per explanation (i)(c) of Section 92B of the Income Tax Act as amended by Finance Act, 2012 w.r.e.f. 01.04.2002, the interest receivables is an international transaction. Section 92B(i)(c) reads capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business. 28. In CIT Vs ..... 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