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TMI Blog2019 (8) TMI 1749X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted working capital adjustment, then it will amount to double addition in the hands of the assessee. The issue is also squarely covered by the decision of KUSUM HEALTHCARE PRIVATE LIMITED [ 2017 (4) TMI 1254 - DELHI HIGH COURT] wherein as accepted the reasoning that with the assessee having already factored in the impact of the receivable on the working capital and thereby on its pricing/profitability and that of its comparables, any further adjustments only on the basis of the outstanding receivable would have distorted the picture and re-characterize the transaction - No reason to sustain the addition made by the learned transfer pricing officer incorporated in the final assessment order. Ground number 2 of the appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1961 ( the Act ), is a vitiated order having been passed in violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and is void ab-initio. 2. That on the fact of the case and in law, the Ld. AO/ Ld. TPO /Hon ble DRP has erred, in making an adjustment of INR 30,82,559 to the total income of the Appellant in respect of notional interest on outstanding receivables. 2.1 That on the facts of the case and in law, the Ld. AO/ Ld. TPO/ Hon ble DRP has erred in re-characterizing the inter-company receivables as a separate international transaction of unsecured loan and imputing interest on such transaction. 2.2 That on the facts of the case and in law, the Ld. AO/ Ld. TPO/ Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law, the Ld. AO/ Ld. TPO/Hon ble DRP has erred, by not giving the benefit of set off the outstanding payables and advances from AEs while computing the TP adjustment on notional interest on outstanding receivables 2.7 That on the facts of the case and in law, the Ld. AO/ Ld. TPO/Hon ble DRP has erred, by considering the interest rate of LIBOR plus 400 basis points without any legal basis for the same. 3. Assessee is in Indian company engaged in providing IT enabled services in the nature of customer relationship management [CRM] services in India and worldwide. It is 100% subsidiary of a Netherlands company. It is remunerated on a cost plus basis. The assessee filed its return of income for the impugned assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cator [PLI] of operating profit to operating cost (OP/OC) which was calculated of the assessee at 14.13 % whereas the profit level indicator of the comparable selected by the assessee using multiple year data was less then PLI of the assessee, it was contested that the transactions entered by into by the assessee are at arm‟s-length. 5. The learned transfer pricing officer proposed an adjustment of INR 17,58,64,489/ in the provision of ITES services international transaction and further proposed an adjustment of INR 30,82,559/- on account of interest on overdue receivable from the associated enterprises. Consequently the draft assessment order was passed by the learned AO. 6. On 30/11/2018, draft of assessment was passed at tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of ITES services to associated enterprises and further the working also considered in the learned transfer pricing officer‟s order giving effect to directions of the learned Dispute Resolution Panel. He therefore submitted that where working capital adjustment has been granted, it takes into account the impact of outstanding receivable on the profitability , therefore , no separate adjustment is warranted on account of overdue receivables. He further relied upon the decision of THE PRINCIPAL COMMISSIONER OF INCOME TAX VS. KUSUM HEALTHCARE PRIVATE LIMITED (ITA number 765/2016) of the honourable Delhi High Court and the decision of the coordinate bench in case of AGILENT TECHNOLOGIES (INTERNATIONAL) PRIVATE LTD VS ASST CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receivable on the working capital and thereby on its pricing/profitability and that of its comparables, any further adjustments only on the basis of the outstanding receivable would have distorted the picture and re-characterize the transaction. Thus, respectfully following the decision of Honourable Delhi High court, we do not find any reason to sustain the addition of INR 3 082559/ made by the learned transfer pricing officer incorporated in the final assessment order. Orders of lower authorities on this issue are reversed. Accordingly ground number 2 of the appeal of the assessee is allowed. 11. Ground number 1 of the appeal of the assessee is general in nature and therefore same is dismissed. 12. In the result appeal filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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