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2020 (3) TMI 1475 - AT - Income TaxTP adjustment - interest on the delayed receipt of money from non-residents -DRP adopted PLR rate instead of LIBOR rate - assessee argued that the interest has to be levied only on the basis of the LIBOR and not under PLR - HELD THAT - Interest was levied due to change in transfer pricing policy for the delayed receipt of purchase money. Therefore the source of interest is foreign country. Moreover, it is well settled principles of law, when money is to be received from outside the country, interest has to be charged only under LIBOR rate and not under PLR rate. In view of the above, we are unable to uphold the orders of the authorities below. Accordingly, the orders of authorities below are set aside and the Assessing Officer is directed to charge interest under LIBOR rate. Disallowance of amount reimbursed for non-deduction of tax - Assessee approached the Authorities for Advance Rulings ( AAR ), whether the reimbursement expenditure is liable for TDS or not - HELD THAT - It is not in dispute that the matter is now pending before the AAR and also the Apex Court. If the Apex Court confirms the order of the Madras High Court, the AAR has to decide the issue one way or the other. Till the final decision is taken by the AAR, in view of the Section 245RR of the Act, no authority including this Tribunal could decide the matter. Therefore, as it was remitted back to the file of the AO in the earlier year, this year also needs to be remitted back to the AO. Appeal of the assessee is partly allowed.
Issues Involved:
1. Dismissal of certain grounds raised by the appellant before the Tribunal. 2. Dispute regarding the levy of interest on delayed receipt of consideration from non-residents. 3. Disallowance of amount reimbursed to M/s. GTE Overseas Corporation for nondeduction of tax. Issue 1: Dismissal of Grounds Raised by the Appellant The appellant's representative did not press Ground Nos. 1, 2, 3, 4, and 6 before the Tribunal, leading to their dismissal. The grounds were not pursued by the appellant's representative, resulting in their rejection by the Tribunal. Issue 2: Levy of Interest on Delayed Receipt of Consideration The Assessing Officer estimated notional interest on delayed consideration from non-residents, applying the Prime Lending Rate (PLR) under the amended transfer pricing scheme. The appellant's representative argued that interest should be based on the LIBOR rate, not PLR. The Departmental Representative contended that Indian interest rates should apply since the source of funds was from India. The Tribunal held that interest was due to a change in transfer pricing policy for delayed purchase money, originating from a foreign country. Following established legal principles, interest should be charged based on the LIBOR rate, not PLR. Consequently, the Tribunal set aside previous orders, directing the Assessing Officer to apply interest under the LIBOR rate. Issue 3: Disallowance of Reimbursed Amount for Nondeduction of Tax The appellant sought Advance Rulings on whether reimbursed expenditure to M/s. GTE Overseas Corporation required Tax Deducted at Source (TDS). Initially, the AAR classified the reimbursement as royalty, necessitating TDS. The matter was referred back to the AAR by the Madras High Court, and it is currently pending there. The appellant requested to keep the issue pending until the AAR's decision, citing Section 245RR of the Income Tax Act, which mandates such action when a matter is before the AAR. The Tribunal concurred and remitted the issue back to the Assessing Officer for reevaluation after the AAR's decision, aligning with the legal provisions. Therefore, the Tribunal partially allowed the appeal, setting the stage for further examination post the AAR's decision. This detailed analysis of the judgment addresses the dismissal of certain grounds, the dispute over interest levy, and the disallowance of reimbursed amounts for tax deduction, providing a comprehensive understanding of each issue's legal implications and the Tribunal's decision.
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