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TMI Blog2023 (4) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... ts pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and recharacterized the transaction. Needless to mention that the law laid down by the Hon ble High Court in the case of Kusum Healthcare was followed by the ITAT in case of Global Logic India Ltd. v. Dy. CIT [ 2017 (12) TMI 1052 - ITAT DELHI] , [ 2020 (6) TMI 712 - ITAT DELHI] , [ 2021 (11) TMI 1090 - ITAT DELHI] - Hence, keeping in view, the established position, we hereby deleted the addition made by the Assessing Officer. Appeals of the assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... margin. 3.3 That on the facts and circumstances of the case and in law, the Ld. TPO/ Ld. AO/ the Hon'ble DRP have erred in disregarding that Indian TP regulations permit aggregation of closely linked transactions for the purpose of benchmarking under TNMM analysis. Rule 10A(d) of the Income Tax Rules, 1962 ("the Rules") define the term transaction for the purpose of 'international transaction' as "Transaction includes a number of closely linked transactions." 3.4 That on the facts and circumstances of the case and in law, the Ld. TPO/ the Ld. AO/ the Hon'ble DRP have erred in not considering the fact that working capital adjustment factors the impact of receivables on the pricing/ profitability of the Appellant vis-a-vis that of comparable companies. 3.5 That on the facts and circumstances of the case and in law, the Ld. TPO/ the Ld. AO/ the Hon'ble DRP have erred in completely disregarding the fact that the AEs do not charge any interest from the Appellant on outstanding payable due to such AEs. 3.6 That on the facts and circumstances of the case and in law, the Ld. TPO/ Ld. AO have erred in using an SBI Prime Lending Rate (" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961 : During the year under consideration, the assessee company entered into International Transactions 'with Associated Enterprises' within the meaning of Section 92B of the I.T. Act, 1961. The details of said transactions are mentioned in Form 3CEB by the assessee. The case was referred to the TPO as per the provision of Section 92CA(1) of the Act for computation of Arms Length Price in relation to the International Transaction. 4.2 Subsequently, an order u/s 92CA(3) of the Act was passed by the TPO, DC IT, IT&TP-1(1)(1), New Delhi on 29.01.2021 wherein an adjustment of Rs.147,38,75,440/- attributable to difference in Arms Length Price of International Transactions entered by the assessee company with its associated enterprises has been made. The details of TP Adjustments as per Para No.8 & 9 of the TPO order are reproduced as under:- S.No. Nature of international transaction Adjustment u/s 92CA (Rs.) 1 Software Development Services 106,88,84,280 2 Technical Support Services 28,26,19,000 3 Interest on receivable 12,23,72,160 Total adjustment 147,38,75,440/- 4.3 In view of the above, an addition of Rs. 147,38,75,440/- was made to the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business and profits. Based on the aforesaid, non-charging of interest by the assessee on outstanding receivable from its AE is said to be prudent from a businessmen's perspective and does not warrant any adjustment. It is also submitted that the assessee is a debt free company and, therefore, no adjustment towards interest on delayed receivables is warranted. Reliance is placed on Bechtel India Pvt. Ltd. vs. DCIT [I.T.A .No. 1478/Del/2015], Global Logic India Ltd vs DCIT (1104/Del/2015) and Kadimi Tool Manufacturing Co (P) Ltd vs DCIT [2017] 187 taxmann.com 42 (Del-Trib.). It is further submitted that no interest is charged by the assessee from AEs as well as from non-AEs. Further, the impact of working capital policy in terms of credit days/ credit period (i.e. outstanding receivables) is said to have been subsumed in the working capital adjustment analysis. Hence, it is pleaded that separate imputation of interest on the outstanding receivables was not warranted. Reliance in this regard is placed on PCIT- V vs. Kusum Healthcare Pvt. Ltd. [2017] 398 ITR 66 (Delhi)/ [2018] 300 CTR 343 (Delhi). The assessee further contests application of SBI PLR rate +300 basis points. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new explanation to section 92B was specifically inserted to reiterate the fact that the items enumerated in the explanation will ipso facto partake the character of an international transaction and will be subjected to transfer pricing provisions irrespective of whether they have any bearing on profit/loss of the relevant year or their impact on profit/loss account is determinable under normal computation procedures other than the transfer pricing regulations. The ld. DRP quoted legislative intent which has been elucidated in the Explanatory Memorandum to the Finance Bill 2012. 11. This issue has been adjudicated by the Tribunal examining the decisions in the case of Kusum Healthcare, Mckinsey Knowledge, Ameriprise India (P.) Ltd. The details are as under. 12. The Delhi Tribunal in case of Kusum Healthcare (P) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 79 held that the working capital adjustment takes into account impact of outstanding receivables and no further adjustment required if the margin of the assessee is higher than working capital adjusted margin of comparable. 13. The Hon'ble Delhi Tribunal in case of Ameriprise India (P) Ltd. (supra) considered the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. No. 360/2018, was pleased to recall/correct their order dated 9-8-2018 holding as under: "9. As far as the first argument by the review petitioner, i.e., the answer to the question of bringing to tax the interest amounts goes, this Court is of the opinion that the fact that the order of 7-2-2018 referred to Kusum Health Care had expressly remitted the matter for consideration to the ITAT supports the assessee's submission. All that the court had stated on 7-2-2018 was that the matter required re-examination by the ITAT in the light of the Kusum Health Care (supra). For these reasons, the judgment to the extent it deals with adjustments made by the TPO, and regarding interest on delayed receipt of receivables, is a clear error. The court also furthermore notes the submissions made with respect to inapplicability to Explanation of Section 92B and its prospective operation. As the order of 7-2-2018 reserved by-contentions, this Court does not propose to disturb the effect of that matter. The matter will be considered by the ITAT on its own merits." 19. In view of the aforesaid sequence of events, it would be noted that the decision of Hon'ble Delhi High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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