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2019 (10) TMI 917 - AT - Income TaxTP adjustment for receivables having delay in receipt of payment of more than 90 days - interest on unrealized export proceeds - HELD THAT - We find identical issue had come up before the Tribunal in assessee s own case for assessment year 2011-12. We find the Tribunal, after considering the arguments made by both the sides has held that the period of 90 days credit is reasonable in the trade of the assessee and accordingly it was restored to the file of the A.O./TPO to compute the transfer pricing adjustment of receivables having delay in receipt of payment of more than 90 days Respectfully following the decision of the coordinate Bench of the Tribunal in assessee s own case, we restore the issue to the file of A.O./TPO to compute the TP adjustment for receivables having delay in receipt of payment of more than 90 days. The ground raised by the assessee is accordingly partly allowed for statistical purposes.
Issues Involved:
1. Jurisdictional error in the reference made by the AO to the TPO. 2. Addition/disallowance on account of interest on the loan to AE. 3. Addition/disallowance on account of interest on unrealized export proceeds. 4. Incorrect calculation of interest under sections 234A, 234B, and 234C. 5. Initiation of proceedings under section 271(1)(c). Detailed Analysis: 1. Jurisdictional Error in Reference to TPO: The assessee contended that the reference made by the AO to the TPO suffered from jurisdictional error as the AO did not record any reasons in the draft assessment order to justify the necessity or expediency of referring the matter to the TPO for determining the arm's length price (ALP) under section 92CA(1) of the Income Tax Act, 1961. 2. Addition/Disallowance on Account of Interest on Loan to AE: The TPO noted that the assessee provided an interest-free loan to its AE, M/s Siddhartha Jewellery (UK) Ltd., and proposed an adjustment of ?11,66,447/-. The assessee argued that the loan was advanced due to commercial expediency and was part of the international transaction related to export sales. The DRP restricted the disallowance to ?7,83,809/-. The assessee challenged the notional interest attribution, emphasizing that the consideration towards the loan was embedded in the sale price of the jewelry and that the loan was repaid in foreign exchange. The Tribunal dismissed this ground as it was not pressed by the assessee. 3. Addition/Disallowance on Account of Interest on Unrealized Export Proceeds: The TPO observed that the assessee realized export proceeds after 60 days and proposed an adjustment of ?81,14,878/- for interest on unrealized export proceeds, considering a 60-day loan credit facility as acceptable. The DRP restricted this disallowance to ?30,98,408/-. The assessee argued that the export proceeds were realized within the statutorily permitted time limits prescribed by RBI and that the pricing with AE included an interest element up to 90 days. The Tribunal found that in the assessee’s own case for AY 2011-12, a 90-day credit period was considered reasonable and restored the issue to the AO/TPO to compute the TP adjustment for receivables with delays exceeding 90 days. 4. Incorrect Calculation of Interest under Sections 234A, 234B, and 234C: The assessee contended that interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961, was wrongly and illegally charged. However, this ground was not argued by the assessee's counsel and was dismissed by the Tribunal. 5. Initiation of Proceedings under Section 271(1)(c): The assessee argued that the initiation of proceedings under section 271(1)(c) of the Income Tax Act, 1961, was erroneous. This ground was also not argued by the assessee's counsel and was dismissed by the Tribunal. Conclusion: The Tribunal partly allowed the appeal for statistical purposes by restoring the issue of TP adjustment for receivables with delays exceeding 90 days to the AO/TPO. Other grounds raised by the assessee were dismissed as they were not argued. The decision was pronounced in the open court on 17.10.2019.
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