9911796707
TMI Blog2016 (1) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... action of sale made to the AE and therefore, it has to be considered alongwith the main transaction. The similar issue had come up for consideration before the Co-ordinate Bench of Mumbai in the case of M/s Goldstar Jewellery Ltd [2015 (2) TMI 58 - ITAT MUMBAI ] wherein held both the TPO and the DRP has taken into consideration the lending rates, however, this is not a transaction of loan or advance to the AE but it is only an excess period allowed for realization of sales proceeds from the AE. Therefore, the arm’s length interest in any case would be the average cost of the total fund available to the assessee and not the rate at which a loan is available. Accordingly, we direct the AO/TPO to re-do the exercise of determination of the ALP in terms of above observation”. Respectfully following the above decision, we hold that there can be no separate international transaction of ‘interest’ in the international transaction of sale. Early or late realization of sale proceeds is only incidental to transaction of sale, but not a separate transaction in nature. Since we hold that the impugned transaction of interest on delayed realization of sale proceeds is not international transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest chargeable to outstanding receivables is without jurisdiction and against the law. iv. The ld.TPO ought to have appreciated that neither accounting principles nor trade practice consider delayed payments by a custo0mer, as an independent transaction as the same is part of the sale transaction and generally, when the customer delays the payment the seeler/supplier always first tries to recover the goods back and hence, viewing such customer dues as an independent transaction is incorrect and unknown to the trade and law. v. The direction by the DRP, is an attempt to widen the scope of the definition of international transaction even by importing a deeming fiction to the section which is against the well settled principles of interpretation of statutes. vi. The direction has erred in holding that the decision by the Hon ble Mumbai ITAT in the case of Nimbus Communications Ltd. Vs ACIT is not applicable to the facts of the current case. Vii. Without prejudice to the above, the ld.TPO has erred in presuming a market-lending rate for a loan transaction as the rate of interest chargeable to a customer upon the delay of dues. The ld.TPO has erred in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tstanding are not an international transactions but only represent the effect of an international transaction to which the provisions of Chapters X do not apply. 4.Without prejudice, the rate of interest adopted for imputing the interest income is very excessive . 3. The facts of the case are that the assessee company is a 100% subsidiary of Avnet Holdings LLC. Since its inception it has been providing marketing services to its holding company and also in the trading of electronic products. The return of income for the assessment year 2007-08 was filed on 30-01-2008 declaring taxable income of ₹ 172,162,090/-. The assessee company is compensated for its services rendered to its holding company in the form of commission at a fixed percentage of value of goods sold. The assessee company also engaged in the trading activities for which it purchases the goods from its holding company. For the assessment year under consideration, the assessee company had reported the following international transaction with its AE in Form 3CEB, as under; Nature of Transaction 3CEB Amount in INR Clause Ref of Purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of credit period cannot be treated as international transaction, and the TPO had no jurisdiction to determine whether a transaction is at arm s length or not which had not been referred to him by the AO. The objections have been overruled by the Hon ble DRP and confirmed the action of the learned TPO. 6. Being aggrieved by this action, the assessee company is before us with the present appeal. 6.1 The learned counsel for the assessee company argued that; a) The transaction of receivable is outside the purview of international transactions b) Even assuming that it is an international transaction, the notional interest should be calculated on the net amount i.e after adjusting the amount due and paid to the AE by the assessee company c) Since the main transaction of sales to the AE is found to be at arm s length, no further adjustment is required to be made. In support of this proposition of law, he relied on the decision of the Co-ordinate Bench of Mumbai Tribunal in the case of M/s Goldstar Jewellery Ltd. Vs JCIT in ITA No.6570/Mum/2012 dated 14-01-2015 also in the case of CIT Vs M/s Cotton Naturals (I) Pvt. Ltd in ITA No.233/2014 of the Hon ble Delhi High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follow-on of the earlier transaction and then the subsequent transaction is carried out and dependent wholly or substantially on the earlier transaction. In other words, if two transactions are so closely liked that determination of price of one transaction is dependent on the other transaction then for the purpose of determining the ALP, the closely linked transaction should be aggregated and clubbed together. When the transaction are influenced by each other and particularly in determining the price and profit involved in the transaction then those transactions can safely be regarded as closely lined transactions. In the case in hand, the credit period extended to the AE is a direct result of sale transaction. Therefore, no question of credit period allowed to the AE for realization of sale proceeds without having sale to AE. The credit period extended to the AE cannot be treated as a transaction stand alone without considering the main transaction of sale. The sale price of the product or service determined between the parties is always influenced by the credit period allowed by the seller. Therefore, the transaction of sale to the AE and credit period allowed in realization o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
