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TMI Blog2018 (6) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... s - thus no TP adjustment can be made - since the very addition is not confirmed, the issue on rate of interest as raised by Revenue in its appeal becomes academic and infructuous - appeal of revenue is dismissed. - ITA Nos.251/Hyd/2016 & 84/Hyd/2017 And ITA No.258/Hyd/2016 - - - Dated:- 8-6-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Sri Saubhagya Agarwal Sri Darpan Kirpalani For The Revenue : Shri J. Siri Kumar ORDER PER B. RAMAKOTAIAH, AM: These are appeals by Assessee for A.Y 2011-12 and 2012-13, and cross appeal by Revenue for A.Y 2011-12 on the orders of DRP followed by the assessment order u/s 143(3) r.w.s 92CA(4) r.w.s 144C(13) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting that the explanation to Sec. 92B of the IT Act does not cover the outstanding receivables on services as this is not a capital financing and further it was submitted that Assessee was fully funded by A.E with no working capital risk and Assessee has not taken any external loans therefore there was no interest payment. It was submitted by Assessee that Assessee is a zero debt company and therefore no interest was charged, not only on the transactions with the A.E but also with third parties. Assessee relied on the decision of ITAT Mumbai in the case of Evonic Debussa India Pvt Ltd., Vs ACIT in ITA No. 7653/Mum/2011. With reference to the contention that outstanding AE receivable towards services was not capital financing u/s 92B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of financial year or period of the realization and not till date of actual collection which is beyond the previous year. It is also contested that the rate of interest proposed by the TPO @ 14.75% in the A.Ys 2011-12 and 2012-13 is higher. 3. The TPO, however, rejected the contentions and stating that Sec. 92B of the IT Act has been amended and so the outstanding receivables can be considered as international transaction, further taking a hypothetical situation in which working capital adjustment may not work out properly if the receivables throughout the year are received by the end of the year, TPO rejected the contentions and worked out the interest @ 12% and determined the TP adjustment at ₹ 3,14,06,014 for A.Y 2011-12, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also did not charge any outstanding amount even from third parties, therefore question of charging interest on the outstanding amount does not arise. He relied on various case law for propositions on the issue. Proposition - I: Outstanding receivables not covered under the def inition of international transaction. i. Pregasystems Worldwide India Pv t Ltd. f or FY 2009-10 (ITA Nos. 1758 1936/Hyd/2014). Proposition II: Fully funded by AE with no working capital risk and no interest payments. i. Hon ble Supreme Court ruling in the case of Bechtel India Pvt. Ltd., Vs DCIT (ITA No. 1478/Del/2015). ii. Hon ble High Court ruling in the case of Bechtel India Pvt. Ltd., Vs DCIT (ITA No. 1478/Del/2015). iii. Bechtel India Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case. Even though DRP tried to distinguish the above decision on f acts, as 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 f rom 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 f inancing as provided f or in the Explanation by the amendment by Finance Act, 2012 retrospectively. Even otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s comparables has already been f actored in the pricing/prof itability of the assessee and therefore, any f urther 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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