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TMI Blog2022 (12) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... in the international transaction of rendering services - Hon ble Delhi ITAT in Kusum Health Care Pvt. Ltd. [ 2015 (4) TMI 180 - ITAT DELHI] held that in case the differential impact of working capital of the assessee vis a vis its comparables has already been factored in the pricing/ profitability of the assessee, further adjustment to the margin of the assessee on the pretext of outstanding receivable is unwarranted and wholly unjustified. In case of Ameriprise India P. Ltd. [ 2015 (8) TMI 652 - ITAT DELHI] considered the decision of Coordinate Bench in the case of Kusum Health Care and held that allowing working capital adjustment in the international transaction of rendering services have no impact on the determination of ALP of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis conducted in the Transfer Pricing Documentation of the Appellant on inappropriate and inadequate grounds; 2.2. accepting companies that were functionally not comparable to the appellant in terms of functions, assets and risk profile. 2.3. rejecting the comparable companies which were comparable to the Appellant, on ground of functional dissimilarity. 3. That on the facts and circumstances of the case, the Ld. AO/Ld.TPO/ Ld. DRP erred in denying the adjustment for working capital position of the Appellant vis-a-vis the comparable companies. 4. That on the facts and circumstances of the case and in law the Ld. AO Ld. TPO/Ld. DRP erred in treating delay in receipt of payment from the AE s, as unsecured loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious Trend Micro Group companies one of which is the assessee, on the basis of the number of calls attended, emails received by it for each of the respective location. This cost allocation forms part of the cost base on which mark up is received by the assessee. At the end of the year the assessee had outstanding payables as well as receivables. 5. During the course of transfer pricing proceedings, the Ld. Transfer Pricing Officer ( TPO ) treated delay in receipt of payment from the AEs as unsecured loans advanced to the AEs and imputed interest by applying a rate of interest @ 4.3311% (mark up of 400 basis points on LIBOR thereby making an addition of Rs. 5,29,694/-. The amount of adjustment was revised to Rs. 2534/- pursuant to the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumes the adjustment on account of receivables no separate adjustment of outstanding receivable is required. 7.2 The Ld. DR relied on the order of the Hon ble DRP and the Ld. TPO. He submitted that the findings of the Hon ble Delhi High Court in Mckinsey s case (supra) is distinguishable on facts as in Mckinsey s case (supra) there were no outstanding receivables itself and the taxpayer received advance payments from its AE s. Ld. DR further submitted that the parties for outstanding receivables and outstanding payables are different. As far as the payables are concerned, the same has not been examined by the Ld. AO/TPO and hence the matter may be remanded back to the file of the Ld. AO/TPO. 8. We have heard the Ld. Representatives of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount received in advance far outweigh the amount received late. Respectfully following the principle laid down by the Delhi High Court in light of the factual matrix of the instant case we are of the view that the Ld. AO/TPO is not justified in charging interest on receivables without factoring in the payables to the AEs. 8.2 Before the Ld. TPO/DRP the assessee submitted that during assessment year 2013-14 there were delayed payments by the assessee to the third party vendors also, for which no interest was charged by them. Thus, the same ought not to be benchmarked in the absence of any interest charged in unrelated party scenario. It is settled principle that there is no need to bench mark the interest on receivables wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de hors the context every item of receivables appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterised as an international transaction. The Hon ble Court further went on to hold that there can be a delay in collection of monies for supplies made, even beyond the agreed limit, due to various factors which would be investigated on a case to case basis. This view has also been followed by the Hon ble Rajasthan High Court in the case of Gillette India Ltd. ITA No. 40/2017 wherein the Hon ble High Court affirmed the order of the ITAT holding that the transaction of allowing credit period to the AE for realisation of its sale proceeds is not an independent international transaction b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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