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TMI Blog2016 (11) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... e concerns accepted by the TPO, i.e., 8% and, therefore, the transactions with the associated enterprises can be accepted to be at an arm’s length and no separate adjustment is required to be made. The aforesaid factual matrix is similar to that considered by the Tribunal in Assessment Year 2009-10 (supra) and, therefore, following the precedent, in the instant year also, it has to be held that the addition of ₹ 12,83,550/- made on account of notional interest chargeable on the outstanding debtor (i.e. associated enterprises) balances is not tenable and is directed to be deleted. - Decided in favour of assessee - ITA No. 7622/MUM/2014 - - - Dated:- 11-11-2016 - Shri G. S. Pannu, Accountant Member And Shri Ram Lal Negi, Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownward adjustment, of notional interest to be charged to AE, to the ratio of Operating Profit to Operating Expenses of the Appellant, the said ratio is much higher than the ratio of Operating Profit to Operating Expenses of the comparable company and hence, no further addition is called for. 5. The Appellant humbly prays that the order of the ld. CIT(A) be set aside and the adjustment on account of arm s length adjustment be deleted. 3. As the Grounds of appeal reveal, the solitary grievance of the assessee is with respect to an addition of ₹ 12,83,550/- made by the Assessing Officer on account of notional interest on the outstanding debtor balances with associated enterprises by treating the same as an international trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitting that non-charging of interest on continuing debit balances of associated enterprises is an international transaction , the arm s length interest on such debit balances be adjusted/reduced from the assessee s margin of 9.19% and the resultant margin would also be favourable in comparison to the average margin of the comparables selected. It has been explained that assessee has given credit period of 45 days to its associated enterprises and with respect to the payments received beyond the credit period, the Assessing Officer had made the adjustment on account of notional interest. The assessee-company has given a working whereby it has adjusted its operating margin of 9.19% by such notional interest calculated either @ 7%, as done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te plea though he has reiterated that the instant transaction is to be construed as an international transaction within the meaning of Sec. 92B of the Act. In our considered opinion, without going into the controversy as to whether the overdue receivables from associated enterprises constitute an international transaction within the meaning of Sec. 92B of the Act or not, the assessee deserves to succeed on its alternate plea. The aforesaid discussion clearly shows that after factoring in the notional interest calculated with respect to the overdue receivables from associated enterprises, the reduced margin of assessee is more than the average margin of the comparables selected thereby showing that no further adjustment is required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, the entity level margin would reduce from 21.29% to 19.65%. It is pointed out that in both the situations, the reduced margin of assessee is much higher than the margin of the comparable concerns accepted by the TPO, i.e., 8% and, therefore, the transactions with the associated enterprises can be accepted to be at an arm s length and no separate adjustment is required to be made. The aforesaid factual matrix is similar to that considered by the Tribunal in Assessment Year 2009-10 (supra) and, therefore, following the precedent, in the instant year also, it has to be held that the addition of ₹ 12,83,550/- made on account of notional interest chargeable on the outstanding debtor (i.e. associated enterprises) balances is not tenab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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