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TMI Blog2018 (2) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order on this score and remit the matter to the file of TPO/Assessing Officer for determining the ALP of the assessee’s combined international transaction of ‘Provision of ITES and SDS’ afresh by considering such companies as comparable which are rendering both ITES and SDS. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such proceedings. Transfer pricing adjustment in the international transaction of ‘Interest on receivables' - It is seen that the assessee reported an international transaction of ‘Interest on receivables’ amounting to ₹ 49,18,007/-. It is further discernible from the Agreement that no credit period has been prescribed for realization of invoices. On a specific query, it was admitted that there were no trade transactions with non AEs. In such a scenario, it is difficult to make any comparative analysis of the time allowed for realization by the assessee to AEs vis-à-vis non-AEs. Applying the decision in Kusum Health Care (2017 (4) TMI 1254 - DELHI HIGH COURT), the Hon’ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices to its group companies. It also undertakes Software development services for developing software applications which are used within the Orange group. The IT enabled network management/technical support and other back office support services performed by the assessee primarily include remote monitoring and maintenance of Orange s global network platforms and services, co-ordination, remote configuration and implementation of quality customer networking solutions. Under the category of Software development services, the assessee is engaged in providing routine contract software development services relating to development and maintenance of applications used within the group like human resources and accounting etc. The assessee filed its return declaring three international transactions in Form No. 3CEB, including, Provision of IT enabled services and Contract SDS with a transacted value of ₹ 241,63,07,817/-. The Assessing Officer referred the matter of determination of the arm s length price of the international transactions to the Transfer Pricing Officer (TPO). The Transactional Net Margin method (TNMM) was applied with the Profit Level Indicator (PLI) of Operating P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition. 5. We have heard the rival submissions and perused the relevant material on record. The primary issue raised before us is against the aggregation of both the SDS and ITES and, thereafter, treating the assessee as an ITES provider for the purposes of choosing comparables and benchmarking. 6. At the outset, the ld. AR contended that the Revenue in the past has benchmarked such international transaction in a segregated manner and hence, no deviation should be allowed in this year. To support the proposition, he relied on the principle of consistency as reiterated in Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC). 7. In our considered opinion, this contention is sans merit. The rule of consistency cannot be stretched so far as to jeopardize the entire benchmarking process envisaged under the Act. When the facts are so glaring, which do not permit adoption of the earlier year s view, we cannot disapprove the correct approach adopted by the TPO in this year simply on the reason that in the preceding year, he approved the wrong approach of the assessee. The Hon ble Supreme Court in CIT vs. Modipon Ltd. (2018) 400 ITR 1 (SC) has held that the issue should be ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for SDS and ITES, the TPO did not accept the same for the reasons discussed above and hence proceeded to determine the ALP by aggregating them. Under such circumstances, it becomes imperative to find out if the assessee had separate authenticated data in respect of ITES and SDS. The only evidence in support of the revenue from the two segments, which has been placed on record by the ld. AR is, some head-counts. The ld. AR claimed that whereas highly qualified persons were used for SDS, lowly qualified persons were used for rendering ITES. From such a chart of head-counts placed before us, it can be seen that two working locations have been shown, viz., Gurgaon and Mumbai. The ld. AR candidly admitted that the assessee was rendering both the SDS and ITES from both these locations. On a specific query, no record could be produced to indicate that the number of employees stated in the chart as rendering SDS and ITES were, in fact, providing the claimed services. Further, the assessee s contention of the segregated revenues in respect of ITES and SDS is not substantiated with any evidence, such as, work-sheets or reports of work done. It is still further relevant to note that the invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise can be properly done at the end of the TPO, we set aside the impugned order on this score and remit the matter to the file of TPO/Assessing Officer for determining the ALP of the assessee s combined international transaction of Provision of ITES and SDS afresh by considering such companies as comparable which are rendering both ITES and SDS. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such proceedings. 12. The only other issue raised in this appeal is against the addition on account of transfer pricing adjustment in the international transaction of Interest on receivables . The factual matrix of this ground is that the assessee reported an international transaction of Interest on receivables with transacted value of ₹ 49,18,007/-. The TPO noticed that payment for the invoices was not realized for a long time and a large amount was outstanding as receivable. Since no time limit was given in the Agreement for realization of invoices, the TPO took a period of thirty days as reasonable for realization and worked out the outstanding amount liable for charge of interest. Chargeable interest rate of 12.87% per annum was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with retrospective effect covers the assessment year under consideration and hence under/nonpayment of interest on the debt arising during the course of business also becomes international transactions, requiring the determination of its ALP. He referred to the decision of the Delhi Tribunal dated August, 2015 in Ameriprise India Pvt. Ltd. VS. ACIT (ITA No.2010/Del/2014) in which this issue has been thoroughly discussed and eventually interest on trade receivables has been held to be an international transaction. Referring to the discussion in the said order, he stated that the Delhi Bench in this case also noted a decision of the Hon ble Bombay High Court in the case of CIT vs. Patni Computer Systems Ltd., (2013) 215 Taxmann 108 (Bom.), which dealt with question of law : (c) Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that there may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, 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 reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. VS. DCIT (2017) 398 ITR 120 (Del) . Following the earlier decision in Kusum Healthcare (supra) , it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the Assessee. Applying the decision in Kusum Health Care (supra) , the Hon ble High Court directed the TPO to study the impact of the receivables appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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