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TMI Blog2020 (12) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... onal transaction shall be considered at LIBOR + 200 basis points rate after the expiry of credit period. Also in the case of Cambridge Technology Enterprises Ltd [ 2019 (11) TMI 1112 - ITAT HYDERABAD] Tribunal held that notional interest has to be charged at LIBOR + interest rates as the receivables are in foreign exchange - we hold that interest rate should be charged on receivables at LIBOR + 200 points. Accordingly, we direct the AO/TPO to charge interest at LIBOR + 200 basis points. Credit period - TPO has allowed 30 days and no agreement was placed by the assessee before us. However, in the case of M/s. Value Labs(Supra), on which reliance was placed by the assessee, this Tribunal held that interest to be charged in the case of delay between 90 to 120 days and in the case of Infor (India) Pvt. Ltd., ITAT allowed 90 days. Considering the facts and merits of the case, we hold that 120 days is reasonable period in this case, hence, we direct the AO/TPO to allow 120 days credit period and charge interest over and above the outstanding period of 120 days. Netting of interest - counsel argued that interest on payables is to be netted against the outstanding receivables - H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggested adjustment for of ₹ 6,54,11,154/- u/s. 92CA(3) of the IT Act. 3.2. Accordingly, the AO issued draft assessment order proposing to make the adjustment u/s. 92CA(3) of the Act to the extent of ₹ 6,54,11,154/-, as suggested by the TPO and in response to which, the assessee filed objections before the Ld. Dispute Resolution Panel(DRP). 3.3. The Ld. DRP upheld the adjustment proposed by the TPO on the ground that interest on receivables would constitute separate international transactions. The DRP observed that the Ld. TPO charged the interest till the date of passing the order, which was not proper, and directed the Assessing officer(AO) to charge the interest till the end of the Financial Year(FY) relevant to Assessment year(AY). The Ld. DRP further directed the AO to restrict the adjustment for delay in payment till the end of FY and also to consider the invoice raised in the earlier FY also, in respect of which payments were received during the FY relevant to the impugned AY and compute the ALP. 3.4. The assessee also raised objections with regard to netting of outstanding payables of ₹ 13,08,87,984/- against the outstanding receivables from its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G (0. 84 ) 15. 69 17. 85 OP/ OC% OP/ OR% 2. 24 4.1. The assessee further submitted that the excess profit earned by the assessee was ₹ 8,77,55,919/-, which takes care of the adjustments that are required to be made to determine ALP in imputing the interest and, thus, argued that no separate adjustment is required to be made on account of imputation of interest on receivables. The assessee further argued that transaction is not covered in the definition of international transaction as defined u/s. 92B of the Act, since, the same was on account of international transactions and not a separate transaction of financing. Accordingly, the Ld. A.R submitted that there is no case for making adjustment and requested to set aside the orders of lower authorities and allow the appeal of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied that any type of advance, payment or default payments or receivables or any debit arising during the course of business constitute international transactions. For the sake of clarity and convenience, we extract clause (c) of explanation to section 92B, which as under: (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 . 6.1. From the plain reading of clause (c) of Explanation to section 92B, it is clear that any debt arising during the course of business constitute international transaction. No separate treatment was given for the trading transactions. Similarly, the contention of the Ld. AR if the international transaction at ALP, no separate adjustment is required to be made on account of outstanding deferred receivables has no basis and the same was not specifically excluded in the meaning of international transaction. Therefore, even though trading transactions are at ALP, with the introduction of amendment to Explanation to section 92B, we are of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he invoices it is provided that the paying party will pay the invoice amount to the invoicing party in accordance with the BT group policy for the settlement of intra-group transaction. Schedule 1 of that agreement is with respect to the services, Schedule -2 is with respect to BTGS transfer pricing policy. According to para No. 3.4 of that policy the service fee for the provision and receipt of services are calculated in the order that BT, BT Ltd. and OPCO receive an arm's length return for the services provided and received. Therefore, according to that policy it is evident that the policy of the group is to charge the services at arm's length. In this background it needs to be examined that whether a third party in a given circumstances would allow it's outstanding to drift to such an extent. The apparent answer to this query would be emphatic No . Further on reading the transfer pricing study report prepared by the assessee, in the credit and collection risk it has been mentioned that when an entity supplies products or services to a customer in advance of customer payment, the firm runs the risk that the customer will fail to make payment. BT e-serv provides servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit, does not have any impact on the benchmarking of the same, as the purposes of RBI policy and Income Tax Act are on different footings. However, even if the agreement does not specify the term of the payment even then assessee must be given benefit of credit period which is accepted business practice in the trade. Before the ld. Transfer Pricing Officer as well as before the ld. DRP the assessee could not establish what is the accepted business practice in its trade about the credit period and what the group policy is in this regard. Therefore, there cannot be any grievance where the ld. Transfer Pricing Officer has considered as 30 days credit period. Even before us this credit period was not challenged. In view of this we do not find any infirmity in the order of the ld. Transfer Pricing Officer of considering 30 days as normal credit period. The subsequent question arises about the benchmarking analysis and computing the arm's length price. In the present case the ld. Assessing Officer has computed interest @14.88% applying the CUP method using external CUP. Before us as well as before the ld. DRP the assessee could not demonstrate how the method employed by the ld. Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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