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TMI Blog2023 (6) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... onal documentary evidence in support of their claim. Interest on trade receivable - Ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points. We direct the AO / learned TPO to adopt the same. Grounds are partly allowed accordingly. - SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER And SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER For the Assessee : Shri Ajit Kumar Jain, AR For the Revenue : Shri Rajendra Kumar, CIT-DR ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 29/07/2022, passed by the Learned Deputy Commissioner of Income Tax, Circle-2(1), Hyderabad ( Ld. AO ) in the case of M/s. Kantar GDC India Private Limited ( the assessee ) for the AY.2018-19, under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 17/09/2021 incorporating these two adjustments also. Aggrieved, assessee filed objections before the learned DRP by order dated 21/06/2022 issued certain directions and confirmed these two TP adjustments. Consequently, learned Assessing Officer passed the order dated 29/07/2022 under section 143(3) r.w.s. 144C(13) of the Act, which is in challenge before us now. 4. Coming to the first adjustment on account of payment for global/regional management overhead allocation fee, learned AR submitted that this issue has arisen on earlier occasions also and by order dated 04/10/2021 in ITA Nos. 627/Hyd/2016 636/Hyd/2016 for the assessment year 2011-12 and by order dated 22/09/2022 in ITA No. 573/Hyd/2017, for the assessment year 2012-13, Co-ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action as defined under section 92B of the Act; that the receivables are consequential/closely linked to the principal transaction of provision of services and hence has been aggregated for determination of ALP under Transactional Net Margin Method (TNMM); that the re-characterising the outstanding receivables as unsecured loan extended by the assessee to its AEs is improper; that the assessee is fully funded by its AEs and does not bear any working capital risks; that the assessee does not chargeable interest on outstanding receivables from third party customers as well; and that the assessee has outstanding payables due to AEs on which no interest has been levied by the AEs as well. 7. Learned AR in the alternative submitted that in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Bombay High Court in Patni Computer Systems (supra), on the amendment to Section 92B of the Act by way of Finance Act, 2012 with retrospective effect from 01/04/2002, it is not open for the assessee to agitate the question as to whether or not the interest on outstanding receivables is an international transaction requiring separate benchmarking. Only issue remains to be considered is in respect of the rate of interest, while placing reliance on the decisions reported in Tecnimont ICB House Vs. DCIT [2015] 60 taxmann.com 143 (Mumbai - Trib.), Hon'ble Bombay High Court in PCIT Vs. Tecnimont (P) Ltd., (supra) and CIT Vs. CottonNaturals (I) (P.) Ltd. [2015] 55 taxmann.com 523 (Delhi). Assessee prayed that LIBOR+200 basis points m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it would examine the cost of interest and if the same is higher than the amount of interest payable on funds obtained locally, it would take a loan from local sources and pay the amounts payable for exports and expenses within time. Therefore, extending of credit beyond the normal period of sixty days is in substance a granting of loan to an AE so as to enjoy the funds, which the AE would otherwise have to repay within the period of sixty days. On this premise the Hon'ble High Court upheld the Tribunal computing interest at LIBOR rates as the rate prevailing in country where the loan is received/consumed by the AE by observing that the same cannot be faulted. 11. In the case of CIT Vs. CottonNaturals (I) (P.) Ltd. [2015] 55 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied for determining the interest rate and the PLR rates are not applicable to loans to be re-paid in foreign currency. Hon'ble Court accordingly held that whatever the principle that is applicable to the case of outbound loans, would be equally applicable to inbound loans given to Indian subsidiaries of foreign AEs, that the parameters cannot be different for outbound and inbound loans, and a similar reasoning applies to both inbound and outbound loans. 12. Respectfully following the judicial opinion stated supra, we are of the considered opinion that the ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points. We direct the learned Assessing Officer / learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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