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TMI Blog2018 (3) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-3-2018 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri Ravi Bharadwaj For The Revenue : Shri R. Laxman ORDER PER P. MADHAVI DEVI, J.M.: This is assessee s appeal for the A.Y 2011-12. The assessee was originally known as M/s Cordys Software India Pvt Ltd., and the assessment was completed in the said name. The appeal was also disposed of by the CIT(A) in the same name. Thereafter, there has been a merger with M/s. Open Text Corporation India Pvt. Ltd., and the revised Form No. 36 incorporating the name of assessee as M/s Open Text Corporation India Pvt. Ltd., is filed on 27.10.2017 and therefore this appeal is disposed in the name of the merged co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mic analysis to determine the arm's length price of the outstanding receivables by ( i) Not appreciating that the receivables due from overseas AE's are in foreign currency and hence interest, if any, is to be benchmarked with the rates prevalent in the international market for foreign currency loans. ( i.e. at USD LIBOR plus ). CORPORATE TAX ISSUES 2. Imposition interest u/s section 234B and 234D of the Act on the Transfer Pricing adjustment. 3. Imposing penalty u/ s 271(1)( C ) of the Act 3. Brief facts of the case are that the assessee company, which is engaged in the business of providing software development services, consultancy and reselling services, filed its e-return for the A.Y 2011-12 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 SOT 525), for charging interest @ 12% p.a and proposed an adjustment under Sec. 92CA of the Act. 6. The A.O, consequently proposed the draft assessment order, against which, the assessee preferred its objections before the DRP. The DRP, vide its orders dated 02.11.2015, confirmed the order of the A.O, but restricted the interest to 5% as against 12% applied by the TPO. Thereafter, the A.O passed the final assessment order, against which the assessee is in appeal before us. 7. The Ld. Counsel for the assessee submitted that the interest on outstanding receivables has become an international transaction only by virtue of Finance Act 2012 and therefore is applicable only prospectively and cannot be applied to the assessment year before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from the facts in both the cases, we are of the opinion that the above decision will equally apply to Assessee's case. Assessee has outstanding service charges receivables and as seen from the order of TPO, the outstanding is only from 31- 07-2009. There seems to be no such delay in earlier months. Assessee has no interest liability at all so notional interest cannot be brought to tax under the provisions of TP. As rightly pointed out by the Ld. Counsel, the outstanding receivables on account of services cannot be equated with capital financing as provided for in the Explanation by the amendment by Finance Act, 2012 retrospectively. Even otherwise, as rightly held by the Logix Micro Systems Ltd v. ACIT [42 SOT 525] (supra), TPO sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored in the pricing/prof itabil ity of the assessee and therefore, any further adjustment to the margins of the assessee on the pretext of outstanding receivables is unwarranted and wholly unjustif ied. 12. We find that the Hon ble High Court of Delhi has confirmed the decision of the ITAT and the SLP filed by the Revenue is pending before the Hon ble Supreme Court. We find that in the case of EPAM Systems India Pvt Ltd in ITA No. 192/Hyd/2017 dated 24.10.2017, Coordinate Bench of this Tribunal has followed the decision of the Hon ble Delhi High Court in the case of Kusum Healthcare Pvt Ltd., to hold that working capital adjustment takes into consideration the interest on the receivables as well. Therefore, on this ground also, no TP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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