2024 (3) TMI 33 - AT - Income Tax

TP Adjustment - Eligible International Transaction - interest on outstanding receivables from the AE in respect of invoices which had been realized beyond the agreed credit period of 60 days - determination of ALP on the fact that the Assessee has opted for the safe harbor regulations in accordance to Section 92CB of the Act read with Rule 10TA to Rule 10TG of the Rules - AO / TPO adopted interest rate calculated at LIBOR 400 basis points and made an ALP adjustment - HELD THAT - AR argument that since the assessee had offered the income by having a mark up of 25% which is the rate prescribed under the Safe Harbour Rules, no other ALP adjustment could be made by the revenue is not acceptable in view of the fact that if an item falls under the definition of Eligible International Transaction as defined in Rule 10TC of the Income Tax Rules (hereinafter referred to as the Rules). Definition of Eligible International Transaction in Rule 10TC is for the purpose of applicability of Safe Harbour Rules only. Hence the international transaction of interest on outstanding receivables does not figure in any of the clauses (i) to (x) in the aforesaid list. Hence the assessee would not be able to get the benefit of ALP adjustment getting subsumed in the mark up of 25% offered under Safe Harbour Rules. However, in consistent with various Tribunal decisions across the country, we hold that adoption of interest calculated on outstanding receivables at the rate of LIBOR 200 basis points should be adopted as against LIBOR 400 basis points. This in our considered opinion, would meet the ends of justice for both the sides. Accordingly, the grounds raised by the assessee are partly allowed.

Summary

Issues Involved:
- Delay in filing appeal during Corona Period
- Adjustment proposed by the Dispute Resolution Panel
- Referral of case to the Transfer Pricing Officer
- Charging of interest on delayed payment
- Proposal to charge interest under sections 234B and 234C
- Issuance of penalty notices under sections 271(1)(c) and 271AA

Summary:
- The appeal was filed with a delay of 86 days due to the Covid-19 Pandemic, which was condoned by the Tribunal.
- The Dispute Resolution Panel proposed an adjustment of Rs. 4,70,258, which was challenged by the assessee.
- The case was referred to the Transfer Pricing Officer for determination of Arm's Length Price (ALP) due to the assessee opting for Safe Harbour Regulations.
- Interest was charged on alleged delayed payment in collection of receivables, which was disputed by the assessee.
- The Assessing Officer proposed to charge interest under sections 234B and 234C, along with issuing penalty notices under sections 271(1)(c) and 271AA.
- The Tribunal held that the ALP adjustment on outstanding receivables should be based on LIBOR + 200 basis points instead of LIBOR + 400 basis points, in line with Tribunal decisions. The appeal of the assessee was partly allowed.

- Separate Judgement: No

(Order pronounced in the open court on 28/02/2024)