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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 ..... AY 2004-05 [ 2011 (6) TMI 140 - ITAT, MUMBAI] on the same issue against the decision of CIT(A) to apply LIBOR rate as against 10% rate charged by the TPO. The coordinate bench vide order dated 30.06.2011, though has dismissed the revenue's appeal on the issue of rate to be applied had made a specific observation that though the CIT(A)'s action with regard to rate is upheld, it does not imply that the ALP adjustment in principle is upheld too. Accordingly the issue of determination of ALP by imputing interest on the delayed receipts from US AE is left open which we have adjudicated in the current appeal. Appeal is allowed in favour of the assessee. - SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND MS. PADMAVATHY S. (ACCOUNTANT MEMBER) For the Appellant : J.D. Mistry Harsh Kapadia For the Respondent : Shri Ashok Kumar Ambastha ORDER Per Padmavathy S (AM): This appeal was originally filed against the order of the Commissioner of Income-tax (Appeals)-15 dated 08/12/2009 for A.Y. 2004-05. The Tribunal, vide order dated 23/03/2022 in ITA No.1034/Mum/2010 has remanded the issue back to the file of the Assessing Officer/ TPO. The assessee filed a Miscel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off amounting to Rs. 22,33,489/- and a short term capital loss of Rs. 6,82,889/-. The Assessing Officer also revised the 10A exemption of the assessee to Rs. 66,57,276/. Aggrieved, the assessee filed appeal before the CIT(A). the CIT(A) gave partial relief to the assessee. 3. The assessee and the revenue filed appeals before the Tribunal. In the appeal filed by the assessee (ITA 1034/Mum/20210), the only issue contended by the assessee was with regard to the TP adjustment made by the Assessing Officer to the tune of Rs. 1,87,52,378/- which was revised by the CIT(A) to Rs. 37,50,475/-. The Tribunal, vide order dated 23/03/2022, has remanded the issue back to the file of the Assessing Officer/ TPO to verify the period of credit as well as the interest paid which is available at that particular point of time in the open market and as per the practice on. The assessee moved a miscellaneous application stating that the Tribunal has not applied the ratio laid down by the jurisdictional High Court in the case of CIT vs Indo American Jewellery Ltd (ITA No.1053 of 2012 dated 08 th January, 2013) and also in the case of CIT vs M/s Living Stones (ITA No.887 of 2014 dated 28 th November, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 378/- (Rs.49,46,60,540/- x 138.37 days 365 days x 10%). Aggrieved, the assessee filed appeal before the CIT(A). 5. Before the CIT(A), the assessee submitted that extension of credit period cannot be equated with a loan for the reason that there are many differences such as, tenor, purpose, funding, security, etc. between a trade credit and a loan. The assessee further submitted that the credit period extended to third party transactions is 150 days which is more than the credit period allowed to the US AE and that the assessee is not charging any interest on the credit period extended to third party. Therefore, the assessee submitted that there should not be any interest charged on the extended credit period to the AE. The assessee also made a without prejudice submission that a six months USD LIBOR prevailing at that time plus a mark up of not more than 75 80 points may be considered for the purpose of charging interest. The CIT(A), after considering the submission of the assessee held that 4.1. Coming to the merits of the addition, it is observed that TPO has equated normal trade credit with the loan. The loan invariably and compulsorily will carry an interest amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended to third parties (non AE) is more than the credit period extended to AE. It is also an accepted fact that the assessee is not charging interest on non AE transactions. Therefore, no interest is to be charged towards credit period extended to AE. The Ld.AR further submitted that similar view has been held by the jurisdictional High Court in the case of Indo American Jewellery Ltd (supra) and M/s Living Stone (supra). The Ld.AR also drew our attention to the facts that in assessee s own case for A.Y. 2005-06 (ITA No.2041/Mum/2010 dated 20.06.2023) on similar issue, the co-ordinate bench has held that no adjustment is required on notional basis by relying on the above two decisions of the jurisdictional High Court. 7. The Ld.DR, on the other hand, vehemently agued that the case laws relied on by the assessee are not applicable in assessee s case. The Ld.DR submitted that case laws relied on is with regard to the company being engaged in the business of diamond industry, whereas the assessee is engaged in the business of software services. The Ld.DR also pointed out that the assessee himself has submitted before the CIT(A) that the extension of credit period is given order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of sale of goods made to third parties carries no interest, then adding of notional interest to delayed payments made by the Associated Enterprises is not called for. 6. In the present case also the Tribunal has rendered a finding of fact that the interest is not being charged in case of sales made to Non- Associated Enterprises for delayed payment just as in the case of Associated Enterprises. These finding of fact rendered by the Tribunal is not shown to be perverse in any manner... 11 Considering the undisputed fact that assessee has also extended credit period to its non-associated enterprises without charging any interest on delayed payment, therefore, after following the decision of Hon ble Jurisdictional High court as referred (supra) this ground of appeal of the assessee is allowed that in such circumstances the AO/TPO is not required to make the adjustment on notional basis. 9. The facts for the year under consideration being similar, respectfully following the above, we hold that no adjustment is required to be made towards interest on the delayed receipts from US AE. 10. Before parting, it is relevant to note that the department had filed a cross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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