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TMI Blog2022 (2) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... lready been restored to the file of the learned AO/TPO, therefore, we restore this issue of benchmarking of interest on receivables also to the file of the Ld AO/TPO, who shall follow the decision in the case of Kusum Healthcare Private Limited [ 2015 (4) TMI 180 - ITAT DELHI ] and ensure that, if working capital adjustment has been allowed to the assessee, no further addition is required for interest on outstanding receivables. The assessee shall be provided adequate opportunity of being heard on the issue in dispute. The ground Nos. 4 to 4.4 of the appeal are accordingly allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, and disregarding Assessee's filters in determining the ALP for the international transactions; 3.4 disregarding and conveniently ignoring the submissions/rebuttals against the rejection reasons provided in the show cause notice on the comparables accepted by the Appellant in its TP Study, based on its surmise and conjecture without adequate supporting or evidence; 3.5 including companies having high margin / volatile operating profit margins in the final comparables' set for benchmarking a low risk captive unit such as the Appellant; 3.6 including certain companies in the final set of comparables that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 3.7 excluding certain companies on arbitrary/ frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 3.8 by committing factual /computational errors in selection/ rejection of proposed comparables and/ or in the operating profit mark-ups of the comparables; 3.9 ignoring the business/ commercial reality that the Appellant undertakes minimal business risks as against comparable companies th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /technical support and other back office support services (ITes) to its group company in Ireland and Contract Software Development services (CSD/IT) for downloading software application for use within Equant group/Associated Enterprises (AEs). For the year under consideration, the assessee filed return of income on 30/11/2016 declaring total income of ₹ 47,03,81,790/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. In view of international transaction entered into by the assessee with its Associated Enterprises, the Learned Assessing Officer referred the matter for determination of arm's-length price of those transactions to the Learned transfer pricing officer (TPO). The adjustment of ₹ 25,32,78,406/- to CST (Contract Software Development) and ITes segment and ₹ 10,73,91,387/- for interest on receivables, totalling to ₹ 36,06,69,793 proposed by the learned TPO was incorporated by the Assessing Officer in the draft assessment order dated 09/12/2019. On the objection raised by the assessee, the Learned DRP issued certain di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised filters. He proposed a set of 20 comparables and determined average of operating profit/total cost at 24.12%. The learned TPO rejected the separate benchmarking for CSD and ITeS segments and he aggregated both the segments for determining the arm'slength price. 5.3 Before us, the Learned counsel of the assessee submitted that Tribunal in the assessee's own case for assessment year 2013-14 has accepted that both the segments need to be benchmarked separately. The Tribunal while deciding the aforesaid appeal held that revenue department in the previous years have already accepted separate benchmarking analysis and since there was no change in the functional profile of the assessee, the segregated approach should be accepted and the Learned AO/TPO should be directed to dispose the issue following the direction of the Tribunal in assessment year 2013-14. 5.4 The Learned DR, on the other hand, relied on the order of the lower authorities. 5.6 We have heard rival submission of the parties and perused the orders, including the order of the Tribunal in ITA No. 6928/Del/2017 for assessment year 2013-14. The Tribunal (supra) in para 22nd and 23rd has directed as under: "22. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for assessment year 2014-15 (ITA No. 6751/Del/2018) and assessment year 2015-16 (ITA No. 7364/Del/2019). The learned counsel submitted that following the decision of the Hon'ble Delhi High Court in the case of PCIT Vs Kusum Healthcare Private Limited (supra), no adjustment is required, if working capital adjustment has been allowed to the assessee while determining arm's-length price of main transactions. 6.3 The Learned DR, on the other hand, relied on the order of the lower authorities. 6.4 We have heard rival submission of the parties and also perused the order of the Tribunal relied upon by the assessee. We find that Tribunal in the case of the assessee for assessment year 2014-15 deleted the adjustment of interest on outstanding receivables observing as under: "12. Having heard the rival submissions, we are of the considered opinion that since no disturbance has been made in so far as OP margin of the assessee is concerned the OPN has been arrived after making working capital adjustment. Operating mark up of the appellant company is 16.19% whereas the comparables working capital adjustment mark up comes to 15.72%. This shows that the profit margin of the appellant compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-." 6.5 It is undisputed that issue in dispute is covered by the decision of the Tribunal (supra). Thus, respectfully following the same, the addition in dispute needs to be deleted. However, we find that benchmarking of the main transaction has already been restored to the file of the learned AO/TPO, therefore, we restore this issue of benchmarking of interest on receivables also to the file of the Ld AO/TPO, who shall follow the decision of the Hon'ble Delhi High Court in the case of Kusum Healthcare Private Limited (supra) and ensure that, if working capital adjustment has been allowed to the assessee, no further addition is required for interest on outstanding receivables. The assessee shall be provided adequate opportunity of being heard on the issue in dispute. The ground Nos. 4 to 4.4 of the appeal are accordingly allowed for statistical purposes. 6.6 The ground No.5 is connected to transfer pricing adjustment adjudicated above, and therefore, we are not required to adjudicate it separately. The ground is accordingly dismissed as infructuous. 6.7 The ground No. 6, being consequential in nature, and ground No.7, being premature, both are dismissed as infructuous. 7. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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