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TMI Blog2015 (7) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... TICB has entered into the following international transactions with its associated enterprises ('AEs'): Sr.No Associated Enterprises International Transactions Amount (INR) Method applied Margin of Appellant Arithmetic mean of single year updated margins of the comparables Transaction with AEs 1 Tecnimont SpA project services 20,35,37,560 TNMM* OP/OC as PLI 17.03% 7.02%(As per assessee's comparables -Annexure-1) (6.12% As per comparable set identified by TPO for AY 2008-09) Electrical & instrumentation work 34,41,48,917 2 Tecnimont Arabia Ltd Electrical & Instrumentation work 139,43,12,063 3 TWS SA Project Services 11,92,62,993 4 Sofregaz SA Project services 1,74,404 5 Tecnimont ICB Qatar WLL PO Project services 4,09,28,739 Transaction with AE's PE in India 6 Tecnimont SpA India Project office Execution of EPC Project 156,69,36,279 Reimbursement of expenses to AEs Recovery of expenses from AEs *All transactions were aggregated and benchmarked using TNMM at segment level TNMM- Transactional Net Margin Method. The TPO accepted all the transactions to be at arm's length price (ÁLP'). However, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so upheld by Delhi Tribunal, specifically dealing in transfer pricing scenario. In this regard, reliance is placed on the Delhi Tribunal ruling in the case of Bharti Airtel Ltd (ITA No.5816/DeI/2012) dated 11 March 2014 (Del) (PB pg 389- 445) wherein the following has been observed: "(34). There is more than one aspect of the matter. The Explanation to section 928 has been brought on the statute by the Finance Act 2012. If one is to proceed on the basis that the provisions of Explanation to section 928 enlarge the scope of section 92B itself, even as it is modestly described as 'clarificatory' in nature, it is an issue to be examined whether an enhancement of scope of this anti avoidance provision can be implemented with retrospective effect. Undoubtedly, the scope of a charging provision can be enlarged with retrospective effect, but an anti-avoidance measure, that the transfer pricing legislation inherently is, is not primarily a source of revenue as it mainly seeks compliant behavior from the assessee vis-a-vis certain norms and these norms cannot be given effect from a date earlier than the date norms are being introduced. However as we have decided the issue in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration. However, the DRP has rejected assessee's contention relying on P&H High Court decision in case of Coca Cola (supra), without considering the facts before P&H High Court in that case. In the above mentioned case, there was transaction between resident (located in India) and non- resident AE (located outside India) and the argument taken by the assessee was that its entire profit is exempt from tax (due to tax deduction) and hence, there is no intention of base erosion and hence transfer pricing is not applicable. As against, in the facts of the present case, the transaction entered by the assessee (located in India) is with PE or its AE (located in India) and hence, it was held by Hyderabad Tribunal in the case of IJM (India) Infrastructure Ltd., 28 ITR (trib) 176 that any transaction of Indian enterprise with PE of foreign company in India would be treated as transaction between two residents and hence, the transfer pricing provisions would not apply in such situation. 6. On the other hand, ld. DR relied on the order of the lower authorities and contended that in respect of export to associate enterprise the amount was recovered after a period of 60 days, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile of AO to recompute the interest in terms of the above direction. 9. It was also brought to our notice that while fixing the sale price the assessee has already considered the delay, if any, in recovery of the price. Accordingly, while recomputing the interest, the AO should also take into account the price fixed by the assessee with respect to the transaction entered with non-AE vis-à-vis AE and if he finds that price so charged has already taken care of the delayed period of payment, the same should be taken into account while computing the interest chargeable. 10. We also found that operating margin earned by the assessee on provision of EPC services (17.03% OP/ OC) from its AEs transactions is higher than the margin earned on its non-AE transactions. Since the transactions are intrinsically linked and the assessee under the TNMM fits within the arm's length, the assessee should be given due credit for the same while computing chargeable interest for delayed payment. 11. The Mumbai Tribunal in the case of Goldstar Jewellery Limited Vs JCIT (ITA No 6570/Mum/2012) held that since sale price of the product or service was always influenced by the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration, the assessee has received advances from AE's for the purpose of export, therefore computation of interest, if any, on delayed recovery of export receivables should be after reducing the advances received from AE's for the purpose of export. Reliance is placed on the Mumbai Tribunal ruling in the case of Boston Scientific International BV India (40 SOT 11) (2010) wherein it has been held that interest income on accounts receivables of an assessee from its AE should be examined after considering the outstanding payables from that AE. 14. From the record, we found that so called delay repatriation from foreign AE's, TPO/ AO, while working out deemed notional interest has considered interest rate of 12.25% p.a. (SBI PLR). As per our considered view the notional interest has to be worked out for so called amount receivable from AE, by applying LIBOR interest rate for the purpose of computation of transfer pricing adjustment, if any. In this regard, reliance is placed on the following decisions, wherein the Hon'ble Tribunals has upheld use of LIBOR for the purpose of benchmarking loan/advance given to foreign AE's: i. Everest Kanto Cylinder Ltd Vs A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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