2022 (12) TMI 353 - AT - Income Tax

TP Adjustment - interest on trade receivables - TPO proposed to compute the interest on delayed trade receivables by using weighted average method - TPO computed the interest by using LIBOR six months 400 basis points - HELD THAT - As we direct the TPO to compute the interest on receivables based on the principle enunciated hereinabove. The directions of the DRP of granting credit period of 90 days is to be granted for year under consideration. In the event, it is found that the interest so computed stands subsumed in the Working Capital Adjustment, no further disallowance has to be made, as has been observed in case of Orange Business Services India Solutions Pvt. Ltd. 2018 (2) TMI 1151 - ITAT DELHI Set off of brought forward business losses and unabsorbed deprecation, set off of MAT credit, and non-granting of foreign tax credit - HELD THAT - We direct the Ld.AO to consider the above claim in accordance with law. The assessee is directed to furnish relevant information / details in support of the claim. Accordingly, these grounds filed by assessee stands allowed for statistical purposes. Levy of interest u/s. 234A B and levy of penalty u/s. 271(1)(c) - AR submitted that 234A interest is not applicable as the assessee filed its return of income within the period of limitation for year under consideration - HELD THAT - We direct the AO to verify the submission of assessee and to consider the claim in accordance with law. Interest u/s. 234B 271(1)(c) penalty are consequential in nature and do not require adjudication.

Issues:
1. Erroneous transfer pricing adjustments arising from interest on trade receivables
2. Erroneous non-set-off of brought forward business losses and unabsorbed depreciation
3. Erroneous non-set-off of MAT credit entitlement
4. Erroneous non-grant of Foreign Tax Credit
5. Erroneous levy of interest under section 234A and 234B
6. Initiation of penalty proceedings under section 271(1)(c) of the Act

Issue 1: Erroneous transfer pricing adjustments arising from interest on trade receivables

The Appellate Tribunal reviewed the case where the assessee challenged the computation of notional interest on trade receivables. The Transfer Pricing Officer (TPO) had proposed adjustments based on the delayed trade receivables using the weighted average method. The TPO's adjustment amounted to Rs. 23,78,93,911. The assessee argued that the credit period for computing interest should be 90 days, citing previous cases. The Tribunal referred to a similar case and directed the TPO to recompute the interest on receivables based on specific principles. The Tribunal upheld the assessee's contention and allowed the grounds raised for statistical purposes.

Issue 2: Erroneous non-set-off of brought forward business losses and unabsorbed depreciation

The Tribunal directed the Assessing Officer (AO) to consider the claim of the assessee regarding the set-off of brought forward business losses and unabsorbed depreciation in accordance with the law. The assessee was instructed to provide necessary information to support the claim. Consequently, the grounds filed by the assessee were allowed for statistical purposes.

Issue 3: Erroneous non-set-off of MAT credit entitlement

The Tribunal directed the AO to consider the claim of the assessee regarding the set-off of Minimum Alternate Tax (MAT) credit entitlement pertaining to earlier assessment years in accordance with the law. The assessee was requested to furnish relevant details to support the claim. Therefore, the grounds filed by the assessee were allowed for statistical purposes.

Issue 4: Erroneous non-grant of Foreign Tax Credit

The Tribunal directed the AO to consider the claim of the assessee regarding the grant of Foreign Tax Credit in accordance with the law. The assessee was instructed to provide necessary information to support the claim. Consequently, the grounds filed by the assessee were allowed for statistical purposes.

Issue 5: Erroneous levy of interest under section 234A and 234B

The Tribunal directed the AO to verify the submission of the assessee regarding the levy of interest under section 234A, as the return of income was filed within the prescribed due date. The Tribunal also noted that interest under sections 234B and penalty under section 271(1)(c) were consequential and did not require adjudication. Therefore, the appeal filed by the assessee was partly allowed on these grounds.

Issue 6: Initiation of penalty proceedings under section 271(1)(c) of the Act

The Tribunal reviewed the initiation of penalty proceedings under section 271(1)(c) of the Act. The AO was directed to consider the objection raised by the assessee against the penalty proceedings in accordance with the law. The Dispute Resolution Panel's dismissal of the objection was noted, and the grounds raised by the assessee were allowed for statistical purposes.

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