2016 (9) TMI 446 - AT - Income Tax

Addition made on account of interest for delayed realisation of revceivables from AE - TPA- Held that - We modify the order of CIT(A) in deleting entire upward adjustment made on account of interest receivable on delayed realisation of export proceeds from A.E., and restrict the disallowance to ₹ 49,66,277/- as there was delay of 76 days more than the delay in case of credit extended by the assessee to Non-AE. Interest rate has been confirmed for earlier year was US LIBOR rate for debts of 1 year maturity period. Hence, such rate for financial year 2008-09 is 2.83%. Accordingly as in the last year, Libor plus 2% works out to 4.83%. Hence, the interest working will be 49.66 crores (net receivables x 4.83%x76 days/365 49,66,277/-). Thus, an amount of ₹ 49,66,277/- will be the transfer pricing adjustment on account of charging of interest to trade debt in r/o A.E. s. Thus, instead of deleting entire addition as done by CIT(A), we upheld the addition to the extent of ₹ 49,66,277/-. Computation of book profit u/s.115JB without including income earned from unit in Special Economic Zone (SEZ), which is exempt u/s.10A - Held that - We confirm the action of CIT(A) for directing the AO to exclude the profit earned from unit exempt u/s.10A while computing book profit u/s.115JB of the I.T.Act.

Summary

Issues:
1. Assessment year 2009-2010: Relief on interest charged on outstanding amount from Associated Enterprise.
2. Assessment year 2009-2010: Profit under section 10A not liable for inclusion in book profit under section 115JB.
3. Assessment year 2010-2011: Relief on interest charged on outstanding amount from Associated Enterprise.
4. Assessment year 2010-2011: Profit under section 10A not included in book profit under section 115JB.

Assessment year 2009-2010:
The revenue contested the CIT(A)'s decision to allow relief to the assessee concerning interest charged on outstanding amounts from Associated Enterprise. The Tribunal referred to the order in the assessee's previous case and the decision of the Jurisdictional Bombay ITAT in the case of Indo American Jewellery Ltd. The Tribunal upheld the deletion of the addition made by the TPO for interest charges, citing uniformity in not charging interest from both AE and non-AE debtors. The Tribunal also considered the Revenue's contention in a Miscellaneous Application (M.A.) regarding interest calculations and restricted the addition to a specific amount. The Tribunal partially allowed the revenue's ground for the assessment year 2009-2010.

Assessment year 2010-2011:
Similar to the previous year, the revenue challenged the CIT(A)'s decision to grant relief on interest charged on outstanding amounts from Associated Enterprise. The Tribunal noted that the credit allowed to AE was less than that to non-AE, leading to no adjustment being necessary. The Tribunal followed the earlier order in the assessee's case and found no fault in the CIT(A)'s decision to delete the AO's adjustment for interest on delayed receivables from AE. Additionally, the revenue contested the computation of book profit under section 115JB, arguing that the profit from the SEZ unit exempt under section 10A should be included. However, the Tribunal upheld the CIT(A)'s decision to exclude the profit earned from the SEZ unit while computing book profit under section 115JB. Consequently, the appeal of the revenue for the assessment year 2009-2010 was partly allowed, while the appeal for the assessment year 2010-2011 was dismissed.