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TMI Blog2022 (4) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of appeal: - 1. Ground No.1 1.1. On the facts and in the circumstances of the case and in law, the learned Assistant Commissioner of Income Tax, Chennai ( Ld. AO ), the Ld. Deputy commissioner of Income tax, Chennai ( Ld. TPO ) and the Ld. Dispute Resolution Panel ( Ld. DRP ), erred in enhancing the income of the appellant by INR 79,265,132 on account of interest at the rate of 21% on receivables purportedly due to the appellant from its Associated Enterprise ( AE ) , without granting working capital adjustment. 1.2. In this regard, the order of the Ld. AO to the extent prejudicial to the Appellant is bad in law and is liable to be quashed. 2. Ground No.2 2.1. On the facts and in the circumstances of the case and in law, the Ld. AO, the Ld. TPO and the Ld. DRP , erred on the following: 1. Treating the receivables due from the AE, as a separate international transaction. 2. Failing to appreciate that cost considered for pricing the international transactions subsumed the credit period extended to the AE. 3. Erred in re-characterising the overdue amount on receivables due from the AE as an unsecured interest-free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee appeared and presented the case. The TPO found that in the instant case the assessee has adopted the Transactional Net Margin Method (TNMM) as the most appropriate method for determining the Arms Length Price of the transactions with its Associated Enterprises and has taken operating profit to operating cost as the profit level indicator for its operations. The assessee in its TP study report identified 14 comparables to bench mark its international transaction with the AE. The weighted average margin on cost of the comparables was shown by the assessee as 13.08% as against the assessee s margin on cost of 9.51%. Availing the permission deviation in computing ALP, the assessee claimed that the transaction with AE were at arm s length. Thereafter the TPO going through all the details and discussing the issue at length, rejected the arguments of the assessee against charging interest on receivables and after working out the interest which ought to have been charged, has come to the conclusion that an upward adjustment of ₹ 7,85,18,835/- to the ALP of the international transaction entered into by the assessee during the year under consideration is required. 3. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is bad in law and is liable to be quashed. 7. Ld AR further submitted before the bench a compendium of case laws and describe the findings in favour pf assessee in those cases under identical circumstances, the case laws with its paras with coclusion on the issue of interest on delayed payment are produced here under: i) Firestone Diamond Pvt . Ltd., ITA No.139/Mum/2014, dated 31.03.2016, wherein the Tribunal has followed its earlier order of the coordinate bench of the Tribunal in the case of Rusabh Diamonds Vs. ACIT , ITA No.2497/Mum/2010, wherein at para 43, the Tribunal has held as under :- 43. When such are the views of Hon'ble High Court, it is not open to us to proceed on the basis that even though, in the light of the law laid down by Hon'ble Delhi High Court in the case of DIT vs New Skies Satellite BV (supra), the amendment is required to be read as prospective, the Tribunal cannot do so as it is a creature of the Income Tax Act itself. In our considered view, and for the detailed reasons set out above, the amendment in Section 92B, at least to the extent it dealt with the question of issuance of corporate gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of all such notional interest cost, wherever it could be imputed and there could be no arm's length price adjustment for any overdue receivables. The Bench has also observed that once there is complete uniformity in not charging any interest from any party, whether Associated Enterprises or non- Associated Enterprises, there could not be any selective imputing of notional IT(TP)A No.57/ Chny /2019 interest on receivable from AE for belated realization of export bills. The relevant findings of the Tribunal in IT(TP) No.57/ Chny /2018 dated 05.04.2019 are as under:- 23. Now we take up the dispute regarding the Arms Length Price adjustment imputing interest on overdue receivables. It is not disputed by the Revenue that assessee had not charged interest either from its Associated Enterprise or from Non Associated Enterprises, for delay in collection of receivables. It is also not disputed that out of the total transactions of the assessee almost 57% were with its Non Associated Enterprises. Once there is complete uniformity followed by assessee in not charging any interest from any party, whether Associated Enterprise or Non Associated Enterprises, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receivables exceeding the credit period of 30 days. Suffice to say, the DRP has admittedly directed the TPO to ascertain LIBOR rate for 12 months in FY.2009-10 without even indicating the corresponding comparables in the relevant segment involving the receivables in issue. We make it clear that Chapter-X in the Act is a special provision wherein each and every upward and downward adjustment ought to be made after analysing the array of comparables in the very segment than based on mere proposal lacking any uncontrolled transactions information. We thus deem it proper to delete the impugned arm s length price of ₹ 18,10,432/- for this precise reason alone. The assessee succeeds in its 10 to 12 substantive grounds and the Revenue s corresponding second substantive ground is declined. 8. On the other hand, ld. CIT-DR with regard to ground No.1, drew our attention to para 3.6 page 8 9 of the DRP order and submitted that the DRP has confirmed the action of the TPO relating to the rate of interest of 21% which has been adopted based on the service agreement and as evident from the copies of the several invoices furnished as part of the submission of the assessee that men ..... X X X X Extracts X X X X X X X X Extracts X X X X
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