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TMI Blog2019 (4) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... e FY relevant to AY 2013-14, amounting to Rs. 30,54,46,034/-. 3. Profile of the taxpayer: M/s Value Labs Technologies is a registered partnership firm under the Indian Partnership Act, 1932 on 11th March, 2011. It is engaged in the business of rendering software development services to its customers and business software solutions that help organizations understand, reuse and modernize the applications that support their fundamental business process. It is registered its unit in Special Economic Zone (SEZ). It provides offshore software development services to its various clients across the globe including the related parties. 3.1 International transactions: As per 3CEB report/TP document, the international transactions reflected are as under: AE Nature of transaction Amount (Rs.) Value Labs Inc Software Development services 14,28,93,424 Value Labs FZ LLC -do- 16,25,52,610 30,54,46,034 The TPO noted that the assessee has not reported in Form 3CEB or TP document for the following transaction: Receivables Rs. 8,41,85,151 3.2 As regards software development services, the TPO observed that margin of the assessee is higher than the average margin of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receivables. Reliance is placed on Chiel India Pvt. Ltd [TS-145-ITAT-2014(DEL)-TP), which also took into account judgement dated 07-10-2010 of ITAT Bangalore Bench in the case of M/s Logix Micro Systems Ltd. Vs. ACIT (ITA no. 524/Bang/2009). 3.6 In view of the above observations, the TPO charged interest @ 14.45% on the receivables received beyond the due date and computed the arm's length price on interest on receivables at Rs. 39,37,353/- and the same was treated as adjustment u/s 92CA of the Act. 4. When the assessee carried the objections before the DRP, the DRP directed the AO to apply the applicable interest as per domestic term deposit rates of SBI prevailing for the FY 2012-13. 5. As per the directions of DRP, the AO computed the interest on receivables at Rs. 17,71,128/-/- as against 39,37,353/-/- computed by the TPO. 6. Aggrieved by the order of DRP, the assessee is in appeal before us raising the following grounds of appeal: 1. Ground No.1 1.1 That, the order of the Learned Transfer Pricing Officer ("Ld. TPO")/ Learned Assessing Officer ("Ld. AO")/ Learned Dispute Resolution Panel ("Ld. DRP") is erroneous both on facts and in law. 2. Ground No.2 2.1 The Ld. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utstanding receivables are accrued from the sale of services rendered to the AE during the normal course of business which is already held by him to be within ALP and hence it cannot be equated to the term' capital financing' as interpreted in section 92B of the Act. 3.8 The Ld. TPO/ Ld. AO/ Ld. DRP has erred in not appreciating the fact that, the assessee has adopted TNMM method for determining the ALP of its transactions and the operating margin of the assessee is much higher than its comparables, hence any adjustment with regard to ALP affecting the operating margin would be unjustifiable and against the provisions of Section 92C of the Act. 3.9 The Ld. TPO/ Ld. AO/ Ld. DRP has erred in not appreciating the fact that no ALP adjustment is required to be made in a case where after reducing the "adjustment as a percentage of operating cost" still the margin of the assessee is more than comparables. 3.10. The Ld. TPO/ Ld. AO/ Ld. DRP has erred both in facts and in law in only allowing ad-hoc credit period of 30 days and have failed to appreciate that the Reserve Bank of India allows a period of one year for receipt of export consideration. 3.11 The Ld. TPO Ld. AO/ Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Hon'ble Karnataka High Court (cited Supra) wherein it has been held that for the purpose of computation of deduction u/s 10B of the Act, if any expenditure is excluded from the export turnover, then the same should also be excluded from the total turnover. Respectfully following the same, we do not see any reason to interfere with the order of the CIT (A) for all the A.Ys and the Revenue's appeals are accordingly dismissed." Following the said decision, we direct AO that since the telecommunication charges are excluded from export turnover, the said charges should also be excluded from the total turnover for the purpose of computing deduction u/s 10AA of the Act. Accordingly, this ground is allowed. 11. As regards ground No. 3 (3.1 to 3.12) regarding adjustment u/s 92(3) on outstanding receivables of Rs. 17,71,128/-, the ld. AR made similar submissions as made before DRP and relied on the decision of ITAT, Delhi Bench in the case of Bechtel India Pvt. Ltd., 1478/Del/2015 and other cases as per case law index. Further, he submitted that assessee has no debt in the company and not charged any interest on delay in payment either from AE or non-AE. 12. The ld. DR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is international transactions and held so far as question (c) is concerned, counsel for the parties state that in view of the amendment to section 92B(1) of the Income Tax Act, 1961 ('Act' for short) by Finance Act, 2012 with retrospective effect from 1st April 2002, the question as framed may be restored to the file of the Tribunal for fresh decision in light on the amendment. Accordingly, this issue is restored to the file of the Tribunal for fresh decision on merits". 4. It is also humbly submitted that reliance of the assessee on the decision of Hon'ble Supreme Court in the case of Bechtel India P Ltd (SLP (C) CC No: 4956/2017) is misplaced because the Hon'ble Supreme Court dismissed the SLP on the ground that there was no questions of law. This is not a ratio decidendi or not even obiter dicta on the substantial issue. On the other hand, as referred above, in the same case of Bechtel India P Ltd, Hon'ble (TAT rendered a later decision, which is cited in the above Paragraph. 5. With regard to the computation of adjustment on account of interest on receivables, it is humbly submitted that the DRP directed the AO to compute the interest till the financial year end and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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