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TMI Blog2017 (4) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessee will have to be studied. In other words, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. The Court finds that the entire focus of the AO was on just one AY and the figure of receivables in relation to that AY can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of ₹ 2,06,64,960/- The return was picked up for scrutiny and notices under section 143(2)/142(1) of the Act were issued by the Assessing Officer ( AO ). Since the Assessee had, during the AY in question, entered into international transactions with its AEs, the case was referred to the Transaction Processing Officer ( TPO ) under Section 92CA of the Act. 5. As far as the Assessee was concerned, it declared the following international transactions i.e. export of manufactured medicines and export of traded medicines. Both the transactions were benchmarked applying TNMM. The profitability of the Assessee from its manufacturing and trading segments was benchmarked with the average operating profit margin earned by comparable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T set aside the assessment order. The ITAT noted that the Assessee had undertaken working capital adjustment for the comparable companies selected in its transfer pricing report. It was further noted that the differential impact of working capital of the Assessee vis- -vis its comparables had already been factored in the pricing/profitability which was more than the working capital adjusted margin of the comparables and, therefore, any further adjustment to the margins of the Assessee on the pretext of outstanding receivables is unwarranted and wholly unjustified. 9. Mr. Raghvendra Singh, learned counsel appearing for the Revenue submitted that the ITAT overlooked the fact that the expression international transaction as defined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis- -vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. 11. The Court finds that the entire focus of the AO was on just one AY and the figure of receivables in relation to that AY can hardly reflect a pattern that would justify a TPO conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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