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TMI Blog2021 (6) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest on receivables addition qua the overdue credit period regarding international transactions between the assessee and its overseas Associated Enterprise - CIT DR fails to rebut the clinching fact that the TPO as well as the CIT(A) have adopted prime lending rate of 14.5% as issued by the SBI which has no relevance to international transactions forming subject matter of ALP determination mechanism before us. All the learned lower authorities have failed to adopt even the most appropriate method MAM before adopting SBI lending than LIBOR rate as the interest on receivables benchmark. There is hardly any dispute that chapter X of the Act is a special provision wherein each and every adjustment qua an assessee s international transaction could be made only after adopting the MAM followed by selection of comparables in the very segment only. We thus direct the TPO to delete the impugned latter adjustment on interest on receivables as well. The assessee succeeds in both of its substantive grievances. - I.T.A. No. 934/Hyd./2019 - - - Dated:- 4-5-2021 - Shri S.S. Godara, Judicial Member And Shri L.P. Sahu, Accountant Member For the Assessee : Ms. Mahima Goud Krut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O erred in ignoring the documentation, factual and legal submissions provided by the Appellant to substantiate the benefit, corresponding economic or commercial value derived on receipt of management services. 2. Interest on outstanding receivables ₹ 73,34,428/- 2.1. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO / Ld. AO erred by considering receivables from AEs as a separate international transaction and further erred in making transfer pricing adjustment by imputing interest amounting to INR 2,26,05,726/- on receivables from AEs by ignoring various rulings as submitted by the Appellant. 2.2. Without prejudice to above ground, the Ld. AO / Ld. TPO erred in bringing notional interest to tax without appreciating the fact that neither the AE nor the Appellant has the practice of charging interest on overdue balances from each other. Without prejudice to the fact that no arm's length determination and consequential TP adjustment is warranted on outstanding receivables, the Appellant would like to raise the following grounds against the computation methodology of the Ld. TPO: 2.3. On the facts and in the circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, the Assessing Officer observed that: The taxpayer made international transactions with its AEs under the manufacturing function as the same are inter-linked with the receipt of management services amounting to ₹ 2,84,58,356/ - under TNMM method. The taxpayer has carried out the economic analysis in the TP documentation by clubbing management services under manufacturing function. This office concludes that management transaction needs to be benchmarked separately and cannot be clubbed under manufacturing function. In this regard, show cause notice was issued to the taxpayer to submit the details. In response, the assessee could not justify the benefit received from the receipt of the management services from AE. Therefore, the submissions and TP documentation maintained by the taxpayer are rejected and arm's length price is determined at nil due to following reasons : The TP documentation maintained does not meet the criteria required under Rules 10B and the benchmarking analysis suffers from errors and cannot be relied upon. The taxpayer did not produce any cogent evidence, except a V write-up intercompany agreement, intercompany invoices a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. 6. The tangible benefit accrued to the taxpayer in this year or coming years. An analysis of profitability of the company in M/S.Adama India Private Limited A.Y.2013-14. the past, present and future years to show that the payment resulted in a tangible benefit. 7. Unless it is shown that tangible and direct benefit is derived by payment of such amount is commensurate with the benefit that is derived or expected to be derived when parties deal with each other at arm's length, the arm's length Price of such payment would be treated as either Rs.Nil or to the extent it is shown that the benefit actually derived from such payment under CUP method. The submissions could not justify any of the above. Based On above reasons, the submission made by the taxpayer is rejected and ALP of payment to AE for management services is determined at Rs. Nil. 5.2 During the Course of appeal proceedings, With regard to the above ground, the appellant submits as under: 'the appellant submitted to the Ld, TPO that it has maintained TP documentation in accordance with the provisions of section 92D read With Rule 10D of the Rules, which provide for the maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it had entered into an inter-company with its AE=Makhteshim Agan Singapore PTE Limited or availing management services. The services rendered by the appellant under management services agreement are aimed to enable the appellant to carry out its business operations more efficiently in an increasingly globalized and competitive scenario. Further by having access to such assistance in accounting matters, assistance in process and quality control services, assistance in relation to procurement and sales which include knowledge/know-how and research reports, etc. are the core services availed by the appellant without which appellant would find it difficult to perform. efficiently and keep up the expectations of customers ill the market. The appellant submits that the services availed by the appellant falls within the explanation of centralized intra-group services as mentioned in the OECD guidelines 2017 on the transfer pricing. The appellant submits that the adjustment on the expenditure on the ground that it was not necessary or prudent is erroneous. [I' the expenditure or payment has been demonstrated to have been incurred or laid out for the purpose of business, the same ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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