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TMI Blog2024 (1) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law the learned CIT(A) erred confirming addition of Rs. 37,50,475 towards interest at a rate of 2% [as against Rs. 1,87,52,378 made by the Assessing Pricing Officer passed u/s 92CA(3) to The total income of the Appellant. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) having accepted the submissions of the Appellant for not charging interest while extending credit to its USA-Associated Enterprise for payment of sale consideration by the AE, ought to have desisted from partially confirming the adjustment to total income, made by the AO-TPO and ought to have deleted the said addition in its entirety. In any event the rate of interest adopted by the learned CIT (A) while partially confirming the addition as aforesaid is excessive and contrary to facts The addition of Rs. 37,50,475 confirmed by the learned CIT(A) be deleted." 2. The assessee is engaged in the business of software services in the field of telecom, internet technology, engineering, etc. The assessee is a joint venture between Mahindra & Mahindra Ltd (57%) and M/s British Telecom (43%). The assessee, for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts such as Invoice number & date, Amount of invoice, stipulated credit period, actual date of receipt, delay in receipt over the stipulated period etc. On perusal of the details filed by the assessee, the TPO was of the view that the assessee has provided excess credit period to its US AE over and above the stipulated credit period and called on the assessee to explain why an adjustment should not be made on account of excess grace period. The TPO also observed that the assessee has charged 10% interest from its German AE for Euro denominated loan granted by the assessee and called on the assessee to also explain as to why interest @10% should not be charged on the delayed receipts on account of software services provided to the US AE. From the details filed by the assessee, the Assessing Officer noticed that the average dates of delay in the case of US AE is 138.37 days on the invoice amount of Rs. 49,46,60,540/-. The assessee submitted that the extended credit period was granted to the US AE so as to enable it to tide over its liquidity situation. The assessee also submitted that it does not charge interest from third parties for extended credit period allowed to them and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO has ignored the economics related to the transaction in as much as AE in USA was incurring losses at that point of time. Charging interest on that extension of credit was to enable the AE to tide their temporary liquidity problem of the AE at USA is backed by the subsequent results as has shown profits from A.Y.2005-06 onwards. This reinforces the economic rationale of not charging any trade credit. In any case, since the AE was having net losses, there was no business consideration to shift profits, as there cannot be any tax liability on account of such losses. 4.3. The appellant has also demonstrated that it has extended credit profit to its non-AE without charging any interest for delayed payment proving that it has been even handed and consistent in this area. It is relevant to add that there was no adjustment on this issue in the TPOs order for A.Y.2002-03 and A.Y.2003-04 implying thereby that transaction was held to be at ALP. There is no change whatsoever on the nature of transactions or time thereof this year. 4.4. However, a Transfer Pricing regime normally judges the Transfer Pricing of the tax payer based on the results rather than on the intent to shift inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... length price of the impugned transaction. 8. We heard the parties and perused the materials on record. We notice that the co-ordinate bench in assessee's own case in ITA No.1035/Mum/2010 for A.Y. 2005- 06 dated 20/06/2023 has considered a similar issue and held that - "10. Heard both the sides and perused the material on record, without reiterating the facts as discussed above in this order, this fact that no interest has been charged by assessee to its non associated enterprises also has been referred by the ld. AO and the ITAT in their findings. The ITAT in the order dated 23.03.2002 at Para 9 of the order has also mentioned that the assessee granted extended credit periods to non-associated enterprises without charging any interest on delayed payment. 10.1 In this regard we have perused the decision of Hon'ble Bombay High court in the case of CIT v/s M/s Indo American Jewellery Ltd. as referred Supra, relating operating part is reproduced as under: "However, in the facts of the present case, the specific finding of the ITAT is that there is complete uniformity in the act of the assessee in not charging interest from both the Associated Enterprises and Non Associated En ..... X X X X Extracts X X X X X X X X Extracts X X X X
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