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TMI Blog2022 (5) TMI 1517X X X X Extracts X X X X X X X X Extracts X X X X ..... he domain to cater to the needs of its AE under which the company will provide marketing services on commission basis. The assessee rendered the following international transactions during the year under consideration:- Sl.No. Particulars Amount 1 Provision of Marketing & Sales support services 44516132 2 Reimbursement of expenses paid 4610344 3 Recovery of expenses 275483 Total 49401959 4. The financial results of the assessee in the TP study are as follows:- Particulars Amount in Rs Revenue from operations (gross) 44516132 Total revenue 44516132 Expenses Employee Benefit Expenses 20817274 Other Expenses 12466568 Total Expenses 33283842 PBT 11232290 OP/OC 33.75% 5. The financials as worked out by the TPO are as under:- Particulars Amount in Rs. Revenue 44516132 Total operating revenue 44516132 Total Expenses 33283842 Total Operating Expenses 33283842 Operating income 11232290 OP/OC 33.75% OP/OR 25.23% 6. The assessee follows Transactional Net Margin Method [TNMM] as the Most Appropriate Method [MAM]. The TPO accepted the arm's length price [ALP] of the assessee and did not make any adjustments. However, the TPO comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DR supported the orders of the lower authorities. 12. We have considered the rival submissions and perused the material on record. In our opinion, the impugned issue is covered by the decision of the coordinate Bench of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. (supra) wherein it was held as under:- "35. The only other issue that remains for adjudication is ground No.15 with regard to re-characterizing certain trade receivables as unsecured loans and computing notional interest on such trade receivables. The main contention of the ld. AR is that deferred receivables would not constitute a separate international transaction and need not be benchmarked while determining the ALP of the international transaction. In our opinion, this issue was considered by the Tribunal in assessee's own case for AY 2014-15 and in para 23 to 23.9 of the order dated 21.5.2020 this Tribunal held as under:- "23. Ground No. 14-17 alleged by assessee against adjustment of notional interest on outstanding receivables. From TP study, it is observed that payments to assessee are not contingent upon payment received by AEs from their respective customers. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest on receivables is an international transaction and the transfer pricing adjustment is warranted. He stated that Finance Act, 2012 inserted Explanation to section 92B, with retrospective effect from 1.4.2002 and sub-clause (c) of clause (i) of this Explanation provides that: (i) the expression "international transaction" shall include- . . . . . (c) capital financing, including any type of longterm or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;. . . . ' 23.5. Ld.CIT.DR submitted that expression 'debt arising during the course of business' refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strumentation Corpn. Ltd. v. Asstt. DIT (IT) [2016] 71 taxmann.com 193/160 ITD 1 (Kol. - Trib.), held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per Explanation to section 92B of the Act. We also perused decision relied upon by Ld.AR. In our considered opinion, these are factually distinguishable and thus, we reject argument advanced by Ld.AR. 23.8. Alternatively, it has been argued that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loans and advances to associated enterprise would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions (P.) Ltd. v. Dy. CIT [2018] 91 taxmann.com 286 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the treatment of interest on deferred receivables is rightly considered as an independent international transaction and benchmarked separately by the revenue authorities. However, we direct that the interest rate to be adopted is LIBOR rate + 2%, taking a consistent view as held in the aforesaid order of the Tribunal, following the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd., 99 CCH 0070 (Mum). Ordered accordingly. 14. During the course of hearing, the ld. AR brought to our notice that there is an arithmetical error in the computation of interest by the TPO on delayed receivables. The ld. AR submitted that the TPO has correctly mentioned the way in which the interest is to be computed in page 19 para 5.26.(vi), however, while computing the interest, the TPO has taken the days beyond 31.3.2017 for calculating the number of days of delay. In this regard, reference was invited to page 236 of the assessee's PB. The relevant observations at para 5.26 (vi) are as follows:- "(vi) The period for which interest has been calculated has been limited to the year under consideration as interest accrued in other years cannot be taxed this year. Similarl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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