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2022 (4) TMI 1058 - AT - Income TaxTP Adjustment - Interest on extended credit to AE - assessee granted extended credit periods to non-AEs without charging any interest on delayed payments - Legality of not charging interest while extending credit to its USA-Associated Enterprise for payment of sale consideration by the AE - HELD THAT - TPO has equated normal trade credit with the loan. The loan invariably and compulsorily will carry interest amount while there was no compulsion in charging trade credit. As per the submissions of the assessee and the observation of the CIT(A) since the AE was having net loss there was no business consideration to shift profit as there cannot be any tax liability on account of such loss. Before the CIT(A) the assessee demonstrated that it has extended credit profit to non-AE without charging any interest for delayed payment proving that it has been even handed and consistent in this area. There was no adjustment on this issue in the TPO s order for A.Y. 2002-03 2003-04 implying thereby that transaction was held to be at ALT. There is no change whatsoever in the nature of transactions or time thereof. CIT(A) has rightly pointed out that Transfer Pricing regime normally judges the transfer pricing of the tax payer based on the results rather than on the intent to shift income from one side to another. In the normal ALP an element of implied interest would always have been there so as to compensate for the opportunity cost and notional financial cost associated with account receivable/ adjustments so called for. Thus USD LIBOR rate at that point of time was 1.22% with markup of 80 basis point would be appropriate for determining ALP interest for trade credit which was be charged to the AE. Thus the CIT(A) granted the partial relief thereby making adjustment at the rate of Rs. 37, 50, 475/-. But this observation appears to be vague as no period was quantified or verified by the Assessing Officer as well as by the CIT(A) while giving this partial relief. This needs to be verified. Therefore we are remanding back this issue to the file of the Assessing Officer/Transfer Pricing Officer to verify the period as well as the interest rate which is available at that particular point of time in the open market and as per the practice on. Thus ground no.1 2 of the assessee s appeal is partly allowed for statistical purpose. Claim of deduction under Section 10A - AO Reduced the consideration in respect of export by expenditure incurred in foreign currency on telecommunications charges - HELD THAT - The assessee pointed out that the assessee claimed the said amount in the return of income by adjusting both export turnover and total turnover. The assessee relied upon the decision of the Special Bench in the case of ITO vs. Sak Soft Ltd. 2009 (3) TMI 243 - ITAT MADRAS-D . The ld. A.R. relied upon the decision of the Tribunal in assessee s own case for A.Y. 2002-03 - The Hon ble Bombay High Court has also granted relief in A.Y. 2004-05 - Thus in the light of the decision of the Hon ble Bombay High Court in assessee s own case for A.Y. 2004-05 we follow the same as the factual aspects are identical in this A.Y. i.e. 2005-06 and therefore the ground raised in Revenue s appeal is dismissed.
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