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TMI Blog2017 (11) TMI 1923X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication of the issues that have been raised before us. In this case, the respective grounds of appeal taken by the assessee and the Revenue are as under:- Assessee's grounds of appeal (ITA No. 567/JP/16) "1. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts and in the circumstances of the case in confirming disallowance under section 14A r.w.r. 8D to the extent of Rs. 6,47,319/-. 2. The learned Commissioner of Income-tax (Appeals) has erred in confirming the interest expenses as per rule 8D without appreciating the fact that the learned AO has not recorded his satisfaction having regards to accounts of the appellant. 3. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts and in the circumstances of the case in confirming disallowances Rs. 64,060/- being 10% of business promotion expenses on estimation basis without appreciating the fact that these expenses were incurred wholly and exclusively for the purpose of business." Revenue's grounds of appeal (ITA No. 610/JP/16) "1. Whether on the facts and the circumstances of the case ld CIT(A) was right in deleting the addition of Rs. 1,87,41,073/- made on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in case of CIT vs. HDFC Bank Ltd. 366 ITR 505. It was further submitted that the said investments were made for acquiring controlling stake and were part of strategic investments and they were not made with an intention of earning tax free income. Accordingly section 14A does not apply to such investment, in support, reliance was placed on decision of Hon'ble Delhi High Court in case of Cheminvest Ltd. v. CIT 378 ITR 33. It was further submitted that disallowance of interest expenditure would not be tenable where AO failed to establish a nexus between interest bearing funds and investment made. In support, reliance was placed on the decision of Hon'ble Karnataka High Court in case of Karnataka State Industrial & Infrastructure Development Corporation Ltd. 65 taxmann.com 295. It was further submitted that no defect has been pointed out by the ld. AO in the claim of the assessee that no expenses were incurred for the purpose of making investment. It was further submitted that the application of section 14A and rule 8D is not automatic and the AO has to record his objective satisfaction having regard to the accounts of the assessee and in support, the ld AR placed reliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est free funds during the year, it is noted that partner's capital account is worth Rs. 115.70 crores. Further, the secured loans availed by the assessee in form of packing Credit Limit (PCL) and Post Shipment Export Finance (PSEF) from various bank are exclusively for the purpose of purchase of raw material, payment of labour charges and other direct expenses and which thus have a end-use restriction and monitoring by the banks towards the manufacturing and export activity of the appellant. In light of above, we agree with the contention of the assessee that giving the availability of interest free funds over and above the secured loans and also the fact that the secured loans had a specific end-use restriction, the investments have been made from its internal accruals in the earlier years and given that no expenditure has been incurred, no disallowance u/s 14A is warranted. Further, the decision of Hon'ble Bombay High Court in case of HDFC Bank Ltd. (Supra) and Hon'ble Gujarat High Court in case of Gujarat Narmada Valley Fertilizers (supra) also supports the case of the assessee. In light of above, ground no. 1 of the assessee is allowed." 8. In light of above, following our dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions with its AEs and operating margin of 6.15% has thus been accepted by the TPO. At the same time, the TPO, on perusal of the financial statements of the assessee, observed that the assessee has substantial amount of outstanding receivables from the AEs which remained outstanding for a long period of time and no interest had been charged on such amount. The TPO decided to examine the said transactions by invoking his powers under section 92CA(2A) and 92CA(2B) of the Act and issued a detailed show cause notice to the assessee which reads as under:- "Perusal of the financials of the assessee company shows that you have substantial amount of outstanding receivables from the AEs, which have remained outstanding for a prolonged period and no interest had been charged on such amount. A perusal of the copies of invoices raised to AEs during the year reveal that the terms of payment have not been honoured and there is a considerable delay in payment as per the period stipulated in invoices or payments have not been received. 2. The main question here is whether the tax payer could have extended such facility to any unrelated party similar to that of the AE without charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of a commercial entity like yours that does not allow such a long period for realization in the normal course of business. In your case, the risk faced is higher. Therefore, it is considered prudent that interest equal to the prime lending rate of the State Bank of India be applied on this account. The PLR of SBI was 11.05% for the FY 2006-07 and 300 basis points to be added for risk including lack of security, forex, processing fee, credit rating and loan tenure is considered appropriate. Therefore, a total of 14.05% markup is considered to be appropriate." 3. * * * * * * 4. Determination of Arm's Length Interest due from AEs:- Subject the above remarks, the interest is calculated in the Annexure-1 to 4 of this notice. The ledger accounts were taken as furnished by the assessee. The interest calculated in the annexure is tabulated below. The credit period as per 'Payment Term' in the Invoices raised has been allowed. The assessee has been allowed the benefit of payables from the AEs and accordingly, the benefit of interest on payables has been allowed. Particulars Interest on outstanding from/to AEs as on 31.3.2006 Interest on export/ import from AEs Total In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r transactions entered into by the assessee with the AEs. 15. Regarding assessee's contention that over dues receivable from AEs cannot be compared to the loan whether secured or unsecured, the TPO held that the transaction has been considered to be similar to the loan transaction and since the assessee has not charged any interest from its AEs, it is required to be examined and charge arm's length interest by considering the rates prevailing in independent transaction. 16. It was further held by the TPO that real income theory is not applicable in the context of chapter X. Further, it was held that the business expediency does not have any role to play. While applying arm's length principle, one has to determine what independent parties in comparable transaction would do. 17. Regarding assessee's contention that it does not charge interest on debit balance with independent parties and under CUP method, no adjustment can be made as controlled transactions is comparable with uncontrolled transactions, it was appreciated by the TPO that main question therefore is whether the taxpayer could have extended such credit facilities to any unrelated party similar to that of its AE withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case or not), the TPO is required to evaluate the arm'slength character of a controlled transaction by comparing the price and conditions to the price and conditions of similar transactions between the taxpayer and an unrelated party ("internal CUP"), or between two unrelated parties ("external CUP"). The immediate question that comes to our mind is that where internal CUP is available, would there be a necessity to examine the external CUP and can the latter be held to present a more reliable outcome in the facts of the present case. We find that the same was appreciated by the ld CIT(A) who on appeal by the assessee, has granted relief to the assessee company by deleting the notional interest charged for delay in realization of export selling invoices. 22. The relevant findings of the ld. CIT(A) is as under:- "3.1.2 I have duly considered assessee's submission and carefully gone through assessment order passed by the AO. I have also taken a note of the factual matrix of the case as well as judicial pronouncements relied upon. It is a matter of fact that as a matter of trade practice in the Gem and Jewellery industry, interest on overdue receipts is not charged. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a benefit of Rs. 1,87,41,073/- on account of notional interest charged for delay in realization of export sales invoices from associated enterprises." 23. During the course of hearing, the ld. AR submitted that assessee firm also made sales to non AEs, during the year under consideration, where it had unpaid receivable at the year end. It was submitted that the assessee firm provided uniform credit, both to AEs and nonAEs/third parties, of 145 days and did not charge any interest, on such unpaid receivables, from both type of the customers. Additional days, taken beyond due date, for making payment by Non-AEs were 18 days whereas those taken by AEs were 5 days. There was no agreement between the assessee firm and the AE to charge interest on delayed payments. It was submitted that the above facts remains undisputed by the lower authorities. 24. It was further submitted that since no interest has been charged from the non AEs, i.e. in case of independent transactions, as well, there cannot be any occasion to make an Arms Length Price adjustment, for notional interest, on delay in realization of trade debts from the AEs. The very purpose of the arm's length price adjustments is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing these judicial precedents we are of the view that the adjustment in relation to notional interest on outstanding receivables cannot be made in the case of the assessee. This ground of the assessee is allowed...." 27. Our reference was also drawn to the decision of ITAT Jaipur Bench in the case of Vaibhav Gems Ltd. (ITA No. 01/JP/2014), wherein the Jaipur Bench, following the ratio laid down in the above mentioned judgments of Indo American Jewellery Ltd. (Supra) and Bausch & Lomb Eyecare (India) (P.) Ltd. (Supra), had deleted the adjustment made by the TPO, with respect to notional interest on delayed realization of sale proceeds and held as under: "We have heard the rival contentions and perused the materials available on record. The fact is that the assessee had adopted uniform policy of not charging interest on delayed realization on sale proceeds from both the AEs and non -AEs customers. This being so, the judgement of Hon'ble Bombay High Court CIT vs. Indo American Jewellery Ltd. and the judgement of ITAT Delhi Bench in the case of Bausch & Lomb Eyecare (India) (P) Ltd. cited (supra) are squarely applicable in assessee's case. Thus, in view thereof, we delete the adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outsider is irrelevant because it is not a case of extending loan or placing deposit, rather it is a case of amount becoming due as a result of commercial transaction. 29.2 Excellence Data Research Private Limited vs. ACIT (2016) 48 CCH 51 Hyd Trib "...Since in the case before us, the facts and circumstances are similar and more particularly the TPO has not taken into consideration that the fact that the assessee has also not charged the interest not receivable from the non AE, we comply the assessee's plea on this ground. Accordingly Ground No. 14 to 17 are allowed...." 29.3 ACIT vs. Gitanjali Exports Corporation Limited (2016) 178 TTJ 0529 (Mumbai) "...We find that this is uncontroverted stand of the assessee that he has not charged interest on delay in realization of debts in non AE situations as well. Once it is not in dispute, as is the case before us, that no interest is charged from the non AEs, i.e. independent transactions, as well, there cannot be any occasion to make an ALP adjustment, for notional interest, on delay in realization of trade debts from the AEs. The very purpose of the arm's length price adjustments is to neutralize the impact of intra AE relationshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behaving in a commercially rational manner. None of these conditions is satisfied in the present case. The form and substance of the transactions are the same. The TPO has not brought on record any material to demonstrate and establish that the form and substance of transactions are different. It is not the case of the Transfer Pricing Officer that the export transaction was a sham transaction to finance the AE. Whatever are the terms of realization of the exports proceeds with the non-AEs, the same are the terms of realization of exports from the non AEs. 32. It was further submitted that realization of export proceeds is inextricably linked with the sale transaction. It was submitted that transaction of allowing credit period to AE on realization of sale proceeds is not an independent international transaction but it is a closely linked or continuous transaction along with sale transaction to the AE. The credit period allowed to the party depends upon various factors which also includes the price charged by the assessee from purchaser. Therefore, the credit period extended by the assessee to the AE cannot be examined independently but has to be considered along with the main in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viously no occasion of any comparison. The stand taken by the revenue, therefore, is not only quite detached from commercial reality but also wholly untenable in law. In any case, what can be examined on the touchstone of arm's length principles is the commercial transaction itself, as a result of which the debt balance has come into existence, and the terms and conditions, including terms of payment, on which the said commercial transaction has been entered into...." "...The international transaction is exports of goods which been benchmarked on TNMM basis and which is duly accepted by the TPO. In view of these discussions, and respectfully following the decision of the coordinate bench in assessee's own case for the earlier years, the grievance of the assessee is upheld and the Assessing Officer is directed to deleted, the impugned ALP adjustment...." 34. It was further submitted that extension of credit to AEs beyond stipulated credit period cannot be construed as an 'International Transaction'. It was submitted that a continuing debit balance, in the account of the AE, does not amount to an International Transaction under section 92B in respect of which ALP adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to be clarificatory should be treated as effective from Assessment Year 2013-14 onwards. Reliance was placed on the decision of the Hon'ble Delhi High Court in the case of New Skies Satellite BV [TS-64-HC -DEL (2016)] held that amendments though originally notified as clarificatory may turn out to be substantive in fact and such a substantive amendment is incapable of being given retrospective effect. Relevant extracts of the said order is reproduced hereunder:- "...Undoubtedly, the legislature is competent to amend a provision that operates retrospectively or prospectively. Nonetheless, when disputes as to their applicability arise in court, it is the actual substance of the amendment that determines its ultimate operation and not the bare language in which such amendment is couched. A clarificatory amendment presumes the existence of a provision the language of which is obscure, ambiguous, may havemade an obvious omission, or is capable of more than one meaning. In such case, a subsequent provision dealing with the same subject may throw light upon it. Yet, it is not every time that the legislature characterizes an amendment as retrospective that the Court will give such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive from 1st April 2002, has to be necessarily treated as effective from, at best, Assessment Year 2013-14. Relevant extracts of the said order is as under:- "....if the 2012 amendment does increase the scope of international transaction under section 92B, as is our considered view, there is no way it could be implemented for the period prior to this law coming on the statute i.e. 28th May 2012. The law is well settled. It does not expect anyone to perform an impossibility. Reiterating this settled legal position, Hon'ble Supreme Court has, in the case of Krishnaswamy S PdVs Union of India [(2006) 281 ITR 305 (SC)].." 40. It was further submitted that similar ratio was laid down by the Hon'ble ITAT Mumbai Benches in the below mentioned cases:- * Hiraco Jewellery (India) Pvt. Ltd., I.T.A. No.7297/Mum/2014 (Mumbai) * Gitanjali Exports Corporation Limited (2016) 178 TTJ 529 (Mumbai) * Siro Clinpharm Private Limited (2016) 177 TTJ 609 (Mumbai) 41. It was finally submitted that without prejudice to the above submissions, interest rate to be charged for excess credit period, should be based on LIBOR rate rather than the interest rate charged by the Domestic Banks. Hon'ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, product or thing; (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; (d) provision of services, including provision of market research, market development, marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service; (e) a transaction of business restructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the sale of goods or services rendered in the course of carrying on the business. Once any debt arising during the course of business has been ordained by the legislature as an international transaction, it is, but, natural that if there is any delay in the realization of such debt arising during the course of business, it is liable to be visited with the TP adjustment on account of interest income short charged or uncharged. Under such circumstances, the contention taken by the assessee before the TPO that it is not an international transaction, turns out to be bereft of any force." 46. Further, we refer to the decision of the Hon'ble Delhi High Court in case of Kusum Health Care Pvt. Ltd. (ITA No. 765/2016 dated 25.04.2017) wherein the Hon'ble High Court was pleased to held as under:- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding receivables beyond 145 days. However, at the same time, there is not enough material on record which throw light on the exact reasons for such delay in receivables and hence, in view of the same, it cannot be stated with certainty that there seems to be some pattern in delayed realization of export proceeds beyond stipulated credit period and continuing debit balance in the account of the associated enterprises which intends to benefit the associated enterprises and amounts to an international transaction in terms of explanation to section 92B of the Act. 48. Here, it would be equally relevant to examine another contention raised by the ld. AR that such amendment by way of an explanation to section 92B is an amendment to a substantive law as it has resulted in enhancement of the scope of international transactions as envisaged u/s 92B of the Act and such amendment, though stated to be clarificatory, should thus be treated as effective from AY 2013-14 onwards and is not applicable for the impugned assessment year i.e, AY 2007-08 and even to two subsequent assessment years ie, AY 2008-09 and AY 2009-10 which are under consideration before us. 49. In this regard, ld. AR has pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date; (ii) the expression "intangible property" shall include - (a) marketing related intangible assets, such as, trademarks, trade names, brand names, logos; (b) technology related intangible assets, such as, process patents, patent applications, technical documentation such as laboratory notebooks, technical know -how; (c) artistic related intangible assets, such as, literary works and copyrights, musical compositions, copyrights, maps, engravings; (d) data processing related intangible assets, such as, proprietary computer software, software copyrights, automated databases, and integrated circuit masks and masters; (e) engineering related intangible assets, such as, industrial design , product patents, trade secrets, engineering drawing and schematics, blueprints, proprietary documentation; (f) customer related intangible assets, such as, customer lists, customer contracts, customer relationship, open purchase orders; (g) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the international transaction. In plain words, a continuing debit balance only reflects that the payment, even though due, has not been made by the debtor. It is not, however, necessary that a payment is to be made as soon as it becomes due. Many factors, including terms of payment and normal business practices, influence the fact of payment in respect of a commercial transaction. Unlike a loan or borrowing, it is not an independent transaction which can be viewed on standalone basis. What can be examined on the touchstone of arm's length principles is the commercial transaction itself, as a result of which the debit balance has come into existence, and the terms and conditions, including terms of payment, on which the said commercial transaction has been entered into. The payment terms are an integral part of any commercial transaction, and the transaction value takes into account the terms of payment, such as permissible credit period, as well. The residuary clause in the definition of 'international transaction', i.e. any other transaction having a bearing on the profits, incomes, losses or assets of such enterprises, does not apply to a continuing debit balance, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, Their Lordships observed as follows: "2. 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 remitted to the file of the Tribunal for fresh decision on merits" 25. The observations so made by Hon'ble jurisdictional High Court, in our limited understanding, cannot be construed as holding that "in view of the amendment by the Finance Act 2012 with retrospective effect from 1st April 2002, the said transaction of charging of interest from the AEs is covered under the amended provision of Section 92B(1) of the Act". As it appears from the plain words of the statute- as extracted earlier, the issue is left open for adjudication by this Tribunal. 26. In any event, to this extent, this judgment does not involve an adjudication on a legal issue as it is a result of consensus of the parties. When both the parties before Their Lordships agreed, and so ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect and it covered certain issues which were already subjected to a judicial interpretation in a particular manner. The judicial interpretation so given was certainly not the end of the road. The matter could have been carried in appeal before higher judicial forums. If the decision of a judicial body does not satisfy the tax administration, nothing prevents them from going to the higher judicial forum or from so amending the law, with prospective effect, that there is no ambiguity about the intent of legislature and it is conveyed in unambiguous words. 31. Nullifying a judicial interpretation though legislative amendment, much as many of us may abhor it, is not too uncommon an occurrence. Of course, when legislature has to take an extreme measure to nullifying the impact of a judicial ruling in taxation, it is the time for, at least on a theoretical note, introspection for the draftsman as to what went so wrong that fundamental intent of law could not be conveyed by the words of the statute, or, perhaps for the judicial forums, as to what went so wrong that the interpretation was so off the mark vis-à-vis fundamental principles of taxation or the sound policy considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, when disputes as to their applicability arise in court, it is the actual substance of the amendment that determines its ultimate operation and not the bare language in which such amendment is couched........ 36. A clarificatory amendment presumes the existence of a provision the language of which is obscure, ambiguous, may have made an obvious omission, or is capable of more than one meaning. In such case, a subsequent provision dealing with the same subject may throw light upon it. Yet, it is not every time that the legislature characterizes an amendment as retrospective that the Court will give such effect to it. This is not in derogation of the express words of the law in question, (which as a matter of course must be the first to be given effect to), but because the law which was intended to be given retrospective effect to as a clarificatory amendment, is in its true nature one that expands the scope of the section it seeks to clarify, and resultantly introduces new principles, upon which liabilities might arise. Such amendments though framed as clarificatory, are in fact transformative substantive amendments, and incapable of being given retrospective effect. .......... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anti abuse legislation, whether SAAR (specific anti abuse rule) or GAAR (general anti abuse rule), is a legislation seeking the taxpayers to organize their affairs in a manner compliant with the norms set out in such anti abuse legislation. An anti-abuse legislation does not trigger the levy of taxes; it only tells you what behaviour is acceptable or what is not acceptable. What triggers levy of taxes is non-compliance with the manner in which the anti-abuse regulations require the taxpayers to conduct their affairs. In that sense, all anti abuse legislations seek a certain degree of compliance with the norms set out therein. It is, therefore, only elementary that amendments in the anti-abuse legislations can only be prospective. It does not make sense that someone tells you today as to how you should have behaved yesterday, and then goes on to levy a tax because you did not behave in that manner yesterday. 37. When this is put to the learned Departmental Representative, his stock reply is that the amendment only clarifies the law, it does not expand the law. 38. Well, if the 2012 amendment does not add anything or expand the scope of international transaction defined under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered the decision of the Hon'ble Delhi High Court in case of New Skies Satellite BV and has held that explanation to Section 92B which increases the scope of international transaction, has to be necessarily treated as effective prospectively from the assessment year 2013-14 though stated to be clarificatory and stated to be effective from 1st April 2002. We have also gone through other Coordinate Bench decisions in case of Gitanjali Exports Corporation (supra) and Siro Clinpharm Private limited (supra) where similar view has been taken. The decision of Hon'ble Bombay High Court in case of Patni Computer Systems Ltd. has been rightly analysed by the Coordinate Bench in Rishabh Diamonds (supra) and it was held that "rather than answering this question on merits, and with the consent of both the parties, Their Lordships sent the matter back for fresh consideration of the Tribunal" and to this extent, the decision of the Coordinate Bench in case of Ameriprise India Pvt Ltd which has equally relied on the said decision of the Bombay High Court is distinguishable. In light of the same, following the decision of the Coordinate Bench in Rishabh Diamonds and in absence of any contrary hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the profit of one Associated Enterprise is negligible and the other Associated Enterprise has incurred losses and therefore it cannot be said that the assessee had transfered any profit to the Associated Enterprises outside India by not charging interest on the outstanding payment which has been realised after the due date and accordingly deleted the interest charged on late realisation of the export proceeds. 5. On appeal filed by the Revenue, the ITAT upheld the order of CIT(A). While, upholding the order of CIT(A), the ITAT held that interest income is associated only with the lending or borrowing of money and not in case of sale. We express no opinion on the above reasoning of the ITAT and keep that reasoning open for debate in an appropriate case. However, in the facts of the present case, the specific finding of the ITAT is that there is complete uniformity in the act of the assessee in not charging interest from both the Associated Enterprises and Non Associated Enterprises debtors and the delay in realisation of the export proceeds in both the cases is same. In these circumstances the decision of the Tribunal in deleting the notional interest on outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. M/s Indo Amercian Jewellery Ltd.) rendered on 8th January, 2013. In the above case a similar question was not entertained by this Court on the ground that there is complete uniformity in the act of the assessee therein in not charging interest from Associated Enterprises and Non Associated Enterprises for delay in recovery of its sale proceeds. 6. In the present case also the Tribunal has rendered a finding of fact that the interest is not being charged in case of sales made to Non-Associated Enterprises for delayed payment just as in the case of Associated Enterprises. These finding of fact rendered by the Tribunal is not shown to be perverse in any manner. 7. Consequently, the question of law as proposed does not give rise to any substantial question of law. Thus not entertained." 55. Applying the above legal proposition in the instant case, we find that there are sales made to associated enterprises amounting to Rs. 3,53,56,20,066 and sales to non-associated enterprises amounting to Rs. 1,98,60,46,262. The sales to associated enterprises constitute 64% of total sales made by the assessee and at the same time, there are sales to non-associated enterprises which equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended such facility to any unrelated party similar to that of the AE without charging adequate compensation. Interestingly, in this regard, the TPO acknowledged the fact the assessee has extended similar credit facility to non-AEs without charging any interest but he refused to accept the same and went ahead and computed ALP adjustment by way of notional interest applying CUP method. It is this fallacy in stand of the Revenue that we find is not in consonance with the transfer pricing regulations. The whole exercise of ALP adjustment is to neutralize the impact of inter-se relationship between the associated enterprises and what is therefore relevant is not just to examine whether there is delay in realization of export proceeds from the associated enterprises but delay in realization of export proceeds vis-à-vis similar situation with non-associated enterprises. And on the same footing, what is therefore equally relevant is not just to examine whether the assessee is charging any interest for delay in realization of export proceeds from the associated enterprises but charging interest for the delay in realization of export proceeds vis-à-vis similar situation with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onance with Rule 10A(d) as well as the concept of aggregation of closely linked transaction supported by the OECD transfer pricing guidelines. It is not the case of the Revenue before us that where such a transaction is aggregated with transaction of extending credit period for realization of sale proceeds beyond the prescribed period to the associated enterprise, it will require any further ALP adjustment than what has been determined by the assessee and accepted by the TPO. In the instant case, the international transaction of export of goods has been duly benchmarked on TNMM basis and the assessee has reported its operating margin of 6.15% as against the comparable updated margin of 6.00% which has been accepted by the TPO and thus not in dispute and thus doesn't require any further ALP adjustment. 60. In light of above discussions and in the entirety of facts and circumstances of the case, we confirm the order of the ld CIT(A) in setting aside the order of the TPO and the AO in relation to ALP adjustment in relation to interest on outstanding receivables from the associated enterprises. In the result, ground no. 1 of the Revenue's appeal is dismissed. 61. Now coming to ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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