2016 (11) TMI 1647 - HC - Income Tax

TP Adjustment - notional interest on delayed collection of consideration on sale of goods to Associated Enterprises - Associated Enterprises to whom the sales were made got on an average a longer period for payment of the sale proceeds as compared to the Non- Associated Enterprises - HELD THAT- Tribunal by the impugned order rendered a finding of fact that the respondent assessee has not charged any interest from third parties i.e. Non Associated Enterprises on delayed payments exceeding more than 300 to 400 days from the sale of goods. Consequently, it holds that once such delayed payment in respect of sale of goods made to third parties carries no interest, then adding of notional interest to delayed payments made by the Associated Enterprises is not called for. As placed reliance upon the order in M/s.Indo Amercian Jewellery Ltd. 2013 (1) TMI 804 - BOMBAY HIGH COURT wherein similar question was not entertained by this Court on the ground that there is complete uniformity in the act of the assessee therein in not charging interest from Associated Enterprises and Non Associated Enterprises for delay in recovery of its sale proceeds. In the present case also the Tribunal has rendered a finding of fact that the interest is not being charged in case of sales made to Non-Associated Enterprises for delayed payment just as in the case of Associated Enterprises. These finding of fact rendered by the Tribunal is not shown to be perverse in any manner. No substantial question of law

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding Assessment Year 2007-08; Justification of deletion of addition by Transfer Pricing Officer for longer credit period to Associated Enterprises compared to Non-Associated Enterprises.

Analysis:
The appeal under Section 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal (Tribunal) for Assessment Year 2007-08. The main question raised by the revenue concerns the justification of deleting the addition made by the Transfer Pricing Officer due to the longer credit period granted to Associated Enterprises compared to Non-Associated Enterprises. The grievance of the revenue is based on the argument that the respondent-assessee provided a longer credit period to Associated Enterprises on sales of goods, leading to the need to add notional interest on delayed collection of consideration to determine an arms length price.

The Tribunal, in its impugned order, found as a fact that the respondent-assessee did not charge any interest from Non-Associated Enterprises on delayed payments exceeding 300 to 400 days from the sale of goods. Consequently, the Tribunal concluded that since no interest was charged on delayed payments from third parties, adding notional interest to delayed payments by Associated Enterprises was unwarranted. The Tribunal relied on a previous order of the Court in a similar case to support its decision, emphasizing the uniformity in the assessee's practice of not charging interest from both Associated and Non-Associated Enterprises for delayed recovery of sale proceeds.

Moreover, the Tribunal's factual finding that interest was not charged in the case of sales to Non-Associated Enterprises for delayed payments, similar to the treatment of Associated Enterprises, was deemed non-perverse. Consequently, the proposed question of law was considered not to give rise to any substantial legal issue and was not entertained. Ultimately, the appeal was dismissed, and no costs were awarded.