9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (2) TMI 1567 - AT - Income TaxTP Adjustment - ALP of intra group services received by one of the associated enterprises - HELD THAT - As decided in own case 2018 (5) TMI 1972 - ITAT DELHI It is not for the revenue authorities to dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur. The question whether decision was commercially sound or not is not relevant.It is incorrect to say that the assessee has not provided appropriate/logical allocation of cost to ATK affiliates for management support and cost allocated to ATK India - Considering the cost allocation chart exhibited elsewhere supported by evidences placed as exhibits in the paper book, we do not find any merit in the transfer pricing adjustments made by DRP/TP/Assessing Officer on this count and the same is directed to be deleted. Adjustment of interest on inter-company credit - assessee has received interest on loan advanced to AE named as A.T. Kearney Finance Ltd. and used CUP method for the interest transactions on loan - TPO rejected the ALP of the assessee and instead required to charge interest @ 14.88% (being SBI PLR 300 basis points) - HELD THAT - As decided in own case 2018 (5) TMI 1972 - ITAT DELHI since the assessee has received interest from its AE in France, applying prime lending rate of RBI is not proper In any case, since the assessee is receiving interest on FD @ 7.56%, interest received from AE @ 8.46% can be considered at ALP. Therefore, no TP adjustment is called for. Comparable selection - Companies as Government of India Undertakings - HELD THAT - WAPCO Ltd and Antrix Corporation Ltd. are Government of India Undertakings, we hold that these two companies cannot be held as comparable with the assessee company and are to be rejected. So far as Edserv Softsystems Ltd. is concerned, it is the submission of the ld. Counsel for the assessee that the TPO, in the succeeding years has not considered this company as a functionally comparable company and has agreed with the assessee in considering the company as a functionally non-comparable. We, therefore, deem it proper to restore this issue to the file of the AO/TPO with a direction to verify the analysis done by them in subsequent years and find out as to whether this company is functionally similar or dissimilar to that of the assessee company and decide the issue as per fact and law. Interest on outstanding receivables - outstanding receivables were re-characterized as unsecured loan, thus applying the interest rate of 15.77% (i.e., SBI PLR 300 basis points), the TPO proposed an upward adjustment on the receivables - CIT-A directed that the interest be computed @ 14.77% being SBI PLR 300 basis points - HELD THAT - We find the issue stands covered in favour of the assessee by the decision of the Hon ble Delhi High Court in the case of PCIT vs. Kusum Healthcare Pvt. Ltd . 2017 (4) TMI 1254 - DELHI HIGH COURT as held The conclusion in the explanation to section 92B of the Act of the expiration receivables does not mean that de hors the context every item of receivables appearing in the accounts of an entity, which may have dealings with the foreign AEs would 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 facts which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee will have to be studied. In other words, there has to be a proper enquiry 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 80AE, the arrangement reflects an international transaction intended to benefit the AE in some way. - We direct the AO/TPO to delete the addition on account of interest outstanding receivables.
Issues Involved:
1. Availing of Intra-group services (adjustment of INR ?2,28,44,668 for A.Y. 2010-11 and INR ?2,66,25,507 for A.Y. 2009-10). 2. Interest on intercompany credit (adjustment of INR ?60,89,881). 3. Provision of management consultancy services (adjustment of INR ?22,94,854). 4. Alleged interest on outstanding receivables (adjustment of INR ?59,50,217). 5. Levy of interest under sections 234A, 234B, 234C, and 234D. 6. Levy of penalty under section 271(1)(c). Detailed Analysis: 1. Availing of Intra-group Services (A.Y. 2010-11 and 2009-10): The assessee challenged the arm's length price (ALP) of transactions related to intra-group services. The CIT(A) upheld 50% of the adjustment while accepting that the commercial expediency of the services should not be questioned. The Tribunal found that the facts of the case were identical to those in the assessee’s own case for A.Y. 2008-09, where it was established that the TPO should not question the commercial wisdom of the assessee. The Tribunal directed the AO/TPO to delete the addition, allowing the grounds raised by the assessee. 2. Interest on Intercompany Credit (A.Y. 2010-11): The TPO had applied an arbitrary rate of 13.88% on the international transaction of interest earned on inter-company credit. The Tribunal referred to the decision in the assessee's own case for A.Y. 2008-09, where it was held that applying the prime lending rate of RBI was not proper, and the interest received from AE at 8.46% was considered at ALP. The Tribunal directed that no TP adjustment was called for, allowing the grounds raised by the assessee. 3. Provision of Management Consultancy Services (A.Y. 2009-10): The assessee contested the inclusion of certain comparables by the TPO/CIT(A). The Tribunal found that WAPCOS Ltd. and Antrix Corporation Ltd., being Government of India Undertakings, could not be considered comparable with the assessee company. For Edserv Softsystems Ltd., the Tribunal restored the issue to the AO/TPO to verify the analysis done in subsequent years and decide if the company is functionally similar or dissimilar. The ground was allowed for statistical purposes. 4. Alleged Interest on Outstanding Receivables (A.Y. 2009-10): The TPO had re-characterized outstanding receivables as unsecured loans and applied an interest rate of 14.77%. The Tribunal referred to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Kusum Healthcare Pvt. Ltd., which held that not every item of receivables constitutes an international transaction. The Tribunal directed the AO/TPO to delete the addition, allowing the grounds raised by the assessee. 5. Levy of Interest under Sections 234A, 234B, 234C, and 234D: The Tribunal held that the levy of interest under these sections is mandatory and consequential in nature, dismissing the grounds raised by the assessee. 6. Levy of Penalty under Section 271(1)(c): The Tribunal dismissed the ground related to the levy of penalty under section 271(1)(c) as premature. Conclusion: The appeals filed by the assessee were partly allowed, with significant relief granted on the issues of intra-group services, interest on intercompany credit, and alleged interest on outstanding receivables. The Tribunal emphasized the need for proper verification and adherence to established judicial precedents in transfer pricing adjustments.
|
