2022 (9) TMI 1567 - HC - Income Tax

TP Adjustment - characterization of infra group services transaction - ITAT deleted the addition made holding that the payment made for intra group services was for commercial expediency - HELD THAT - Admittedly the issue pertaining to infra group services is covered by the judgement of this Court 2016 (9) TMI 244 - DELHI HIGH COURT in assessee s own case ITAT as agreeing with assessee contention that agreement between the Assessee and its AE was a composite one and could not be split up for the purposes of holding that some services are at arm s length and some are not as on viewing the agreement as a whole. It was not within the purview of the TPO to determine if some of the services resulted in any actual benefit to the Assessee or not. Not considering interest on outstanding receivables as an international transaction as per Section 92 (B) read with Section 92F(v) - Appellate Authorities below have accepted the contention of the assessee that the assessee was justified in not charging interest on the delayed payments by the AEs and in not levying any interest on delayed payments made by the non-AEs as the debtor days given to the non-AEs were more than the debtor days given to the AEs. ITAT also recorded that at times 120 days are given to the non-AE entity for payment from billing date. Furthermore the Authorities below accepted the contention of the assessee that during the Financial Year 2008-09 the assessee had net monthly balance payable to the AEs as opposed to monthly balance receivable from the AEs as alleged by the Assessing Officer. Consequently given the concurrent findings of facts by the Appellate Authorities below that the debtor days given to the AEs are less than the debtor days given to non-AEs no substantial question of law arises.

Summary

Issues:
1. Challenge to the ITAT order regarding addition made by the Transfer Pricing Officer (TPO) for intra-group services payment.
2. Consideration of interest on outstanding receivables as an international transaction.
3. Application of previous judgment on infra group services from the Court dated 28th July, 2016.
4. Justification for not charging interest on delayed payments by AEs and non-AEs.

Analysis:

1. The appellant challenged the ITAT order regarding the addition made by the TPO for intra-group services payment. The counsel argued that the ITAT erred in deleting the addition and in holding that the payment for intra-group services was for commercial expediency. The ITAT was accused of not considering interest on outstanding receivables as an international transaction, as required by the Income Tax Act. The Court referred to a previous judgment from 2016 in the assessee's own case, where it was held that the TPO cannot split the agreement between the assessee and its associated enterprise for determining arm's length services. The Court found the ITAT's view plausible and did not interfere.

2. The Appellate Authorities accepted the assessee's contention regarding interest on delayed payments by AEs and non-AEs. It was justified that the assessee did not charge interest on delayed payments by AEs and did not levy interest on delayed payments made by non-AEs, as the debtor days given to non-AEs were more than those given to AEs. The ITAT noted that sometimes 120 days were given to non-AE entities for payment from the billing date. Additionally, it was accepted that during the Financial Year 2008-09, the assessee had a net monthly balance payable to AEs, contrary to the Assessing Officer's claim of monthly balance receivable from AEs. Given the concurrent findings of facts by the Appellate Authorities, no substantial question of law arose for consideration, leading to the dismissal of the appeal.

In conclusion, the judgment addressed various issues related to transfer pricing, international transactions, application of previous judgments, and justification for not levying interest on delayed payments. The Court's decision was based on a thorough analysis of the facts and legal principles involved in the case, leading to the dismissal of the appeal based on the established findings and conclusions by the lower authorities.