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TMI Blog2018 (10) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... es would have distorted the picture and re-characterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (2012 (4) TMI 346 - DELHI HIGH COURT). - Decided in favour of assessee. - ITA No. 2082/Hyd/2017 - - - Dated:- 17-10-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri Mithilesh For The Revenue : Shri J. Siri Kumar ORDER PER S. RIFAUR RAHMAN, A.M.: This appeal of the assessee is directed against the order of CIT(A) 5, Hyderabad, dated 22/09/2017 for AY 2013-14. 2. Brief facts of the case are, assessee company, engaged in the business of providing end-to-end IT solutions, services products, filed its return of income for the AY 2013-14 on 27/11/2013 declaring income of ₹ 2,64,07,280/- under normal provisions of the Income-tax Act, 1961 (in short the Act ) and book profit of ₹ 2,51,55,570/-, which was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS and notices u/s 143(2) and 142(1) were issued and duly served on the assessee along with a questionnaire calli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international transaction then the arm's Length Price has to be determined. It is not the case of aggregation of transactions which the taxpayer is projecting when it says that the WCA takes into account the impact of outstanding receivables. In this regard, TPO relied on Chielindia Pvt. Ltd. [TS-145-ITAT-2014 (DEL) and in the case of M/s Logix Micro Systems Ltd. Vs. ACIT (ITA No. 524/Bang/2009). In view of the above observations, the TPO charged interest @ 14.45% on the receivables received beyond the due date as under: Date of rising invoice Amount Date of receipt Delay in no. of days Delay after 90 days credit period Interest adjustment proposed 18/05/12 38127180 16/11/12 182 92 138866 23/0412 10514000 21/02/13 304 214 890752 18/10/12 10822084 23/02/13 128 38 162806 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 days to 90 8.00 7.25 7 7 7 6.5 6.5 7,5 91 days to 179 8.00 7.25 7 7 7 6.5 6.5 7.5 18 7 7.25 7 7 7 6.5 6.5 6.5 CIT(A) observed that the TPO may give credit for the interest amount already offered by the assessee while working out the interest adjustment to be made. 4.1 The CIT(A) further held as under: 5.13 Interest up to end of the year: Further, in my view, the TP adjustment (interest computation) has to be restricted to the period of the relevant assessment year on the rationale of the decision of the Hon'ble Mumbai ITAT, in the case of Technimont ICB House vs. DCIT-9(3), Mumbai 20 (ITA No,487/Mum/2014) in which it was held that 'The addition on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receivables and re-characterizing the outstanding receivables as unsecured loans advanced to AEs c) Not appreciating that the instant transaction is not covered in the definition of international transaction as defined ul s 92B of the Act in the facts and circumstances of the case. 3. Without prejudice, not undertaking an objective economic analysis and determining the arm's length interest rate on outstanding receivables at 7.5% by a) 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 ); b) Not determining the arm's length credit period and not restricting the interest calculation upto March 31, 2013. 6. Ld. AR relied on the following case law: 1. Kusum Healthcare Pvt. Ltd. Vs. ACIT, ITA No. 6814/Del/2014 2. Open Text Corporation India Pvt. Ld. Vs. DCIT, ITA No. 232/Hyd/16 3. EPAM Systems India Pvt. Ltd. Vs. ACIT, ITA No. 192/Hyd/17 4. Batronics India Ltd. Vs. DCIT, ITA No. 259/Hyd/17 5. Hexagon Capacility Center India Pvt. Ld. Vs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n international transaction by itself which required benchmarking. 10. The Court is unable to agree with the above submissions. The inclusion in the Explanation to Section 92B of the Act of the expression receivables‟ does not mean that de hors the context every item of receivables‟ appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterised as an international transaction. There may be a delay in collection 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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