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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 ..... e 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 [ 2017 (6) TMI 1087 - BOMBAY HIGH COURT] Ordered accordingly. Correct calculation of number of days of delay - TPO himself in his order has mentioned that the number of days of delay in realizing the receivables shall be limited to the year under consideration i.e., upto 31.3.2017. It is noticed that from the chart showing the details of the column under the head Delay in number of days upto FY16-17 furnished by the assessee, the TPO has taken into consideration the delay upto the actual date of realization, and not upto 31.3.2017. We therefore direct the TPO to consider the period of delay upto 31.3.2017 while recomputing the interest in accordance with the directions given in this order. It is ordered accordingly. - IT(TP)A No.208/Bang/2022 - - - Dated:- 30-5-2022 - SHRI N.V. VASUDEVAN, VICE PRESEIDENT AND SHRI PADMAVATHY S, ACCOUNTANT MEMBER For the Appellant : Shri Narendra Kumar Jain, Advocate F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 computed the interest on delayed trade receivables and made a TP adjustment of Rs.36,93,339. On appeal, the DRP confirmed the action of the TPO and accordingly the final order of assessment was passed. Aggrieved, the assessee is in further appeal before the Tribunal. 7. The TPO during the proceedings u/s. 92CA of the Income-tax Act, 1961 [the Act] treated the receivables as a separate international transaction to be benchmarked separately. In this regard, the TPO relied on various judicial pronouncements to hold that the aggregation of transactions is possible only when the underlying international transactions are continuously and closely inter-linked. For this purpose, according to him, it was essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Ld.AR submitted that working capital adjustment undertaken by assessee includes the adjustment regarding the receivables and thus receivables arising out of such transaction have already been accounted for. Alternatively, he submitted that working capital subsumes sundry creditors and therefore separate addition is not called for. 23.1. Ld.TPO computed interest on outstanding receivables under weighted average method using LIBOR + 300 basis points applicable for year under consideration that worked out to 3.3758% on receivables that exceeded 30 days. It has been argued by Ld.AR that authorities below disregarded business/commercial arrangement between the assessee and its AE' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT v. Patni Computer Systems Ltd. [2013] 33 taxmann.com 3/215 Taxman 108 (Bom.), which dealt with question of law: (c) 'Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 analysing the statistics over a period of time to discern a pattern which would indicate that vis-avis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd v. DCIT [2017] 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Similarly, interest accrued during the year under consideration, in respect of invoices raised in earlier years which remained unpaid has also been charged. 15. The ld. AR therefore prayed for a direction to the revenue authorities with regard to the correct calculation of number of days of delay, to which the ld. DR had no objection. 16. We observe that the TPO himself in his order has mentioned that the number of days of delay in realizing the receivables shall be limited to the year under consideration i.e., upto 31.3.2017. It is noticed that from the chart showing the details of the column under the head Delay in number of d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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