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TMI Blog2019 (7) TMI 2030X X X X Extracts X X X X X X X X Extracts X X X X ..... HRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For the Assessee : Shri Neeraj Jain, Advocate Shri Abhishek Agarwal, CA For the Revenue : Shri Sanjay I Bara, CIT, DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 13.11.2015 passed by the Assessing Officer u/s 143(3) read with section 144C of the IT Act, relating to assessment year 2011-12. 2. Facts of the case, in brief, are that the assessee M/s CRM Services India Pvt. Ltd., is a 99.9% subsidiary of TPUSA Inc., a Delaware Corporation, running a voice based call centre facility in Gurgaon. It filed its return of income on 29.11.2011, declaring an income of Rs. 10,89,04,919/-. The Assessing Officer referred the matter to the TPO for determining the arm s length price of the international transactions entered into by the assessee. The TPO, during the course of TP assessment proceedings, observed that the assessee has reported the following international transactions:- International Transactions Name of the AE Value (in Rs. ) Method Payment of Royalty TPUSA Inc. 25,300,568 TNMM Information Technology Enabled and related IT Services TPUSA Inc. 674,155,488 TNMM Information Technology Enabled an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to unrelated third parties. 2.2 That the assessing officer/ DRP erred on facts and in law in not appreciating that the entire revenues of the appellant are from sale of services to third parties - whether such third parties are direct customers of the assessee or customers of the associated enterprise, and accordingly royalty was payable on the total revenue. 2.3 That the assessing officer/TPO erred on facts and in law in making a transfer pricing adjustment of Rs. 1,25,61,795 undertaking cost benefit analysis to determine the arm s length price of payment of royalty without appreciating that cost-benefit analysis is not a prescribed method under Rule 10B of Income Tax Rules, 1963. 2.4 That the assessing officer/ TPO erred on facts and in law in applying CUP method for benchmarking the transaction of payment of royalty without placing on record any comparable data for comparison. 2.5 That the assessing officer/ TPO erred on facts and in law in not appreciating that the transaction of payment of royalty has already been benchmarked applying TNM method as the most appropriate method and accordingly, no adjustment is required to be made on this account. 2.6 Without prejudice, that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of hearing. 6. Ground of appeal No.1 by the assessee being general in nature is dismissed. 7. So far as ground of appeal No.2 is concerned, the ld. counsel for the assessee submitted that royalty has been paid to the AE as well as to the third party. The DRP has given direction to delete the royalty that has been paid to the third party. However, they have rejected the contention of the assessee for the royalty paid to the AE. Referring to the copy of the order of the Tribunal in assessee s own case for assessment year 2008-09, 2009-10 and 2010-11, he submitted that under identical circumstances, the Tribunal has restored the issue to the file of the A.O./TPO for determining the issue afresh on the basis of the additional evidences filed under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. He submitted that for this year also the assessee is filing an application under Rule 29 of the Income-tax (Appellate Tribunal) Rules which should be admitted and he has no objection if the matter is restored to the file of the A.O./TPO. He submitted that since the licence agreement was misconceived by the lower authority, therefore, the assessee is filing these additional eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding to hear the arguments of either of the parties on the remaining grounds at the present moment. We, however, note that the assessee will be at liberty to raise these grounds again before the Tribunal at a future date, if it is so required. 8. In the result, the assessee s appeal ITA No. 5930/Del/2013 stands partly allowed for statistical purposes in terms of our directions as contained in the preceding paragraphs. 9. Coming to the assessee s appeal in ITA No. 1630/Del/2014, since we have already admitted additional evidence in respect of the issue pertaining to ALP of royalty in assessment year 2008-09, on identical reasoning, we admit additional evidence in this year as well. Since the lower authorities did not have the benefit of examining this document, the matter has to be necessarily restored to the file of the Assessing Officer / TPO for deciding the issue of royalty afresh after duly considering this agreement and after giving due opportunity to the assessee to present its case. 7. So respectfully following the aforesaid referred to order dated 14.5.2018 for the assessment years 2008-09 and 2009-10 in assessee s own case. The issue under consideration in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in the case of M/s Global Logic India Ltd. in ITA No.1104/Del/2015 and 1115/Del/2017, order dated, 12.12.2017, for assessment year 2010-11 and 2012-13, respectively, he submitted that here also the Tribunal, following the decision of the Hon'ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd., has held that no adjustment can be made on account of notional interest on receivables by relying upon Explanation (i), (a) and (c) to section 92B by treating the continued debt balance as an international transaction. He accordingly submitted that no adjustment on account of receivables is called for. 14. The ld. DR, on the other hand, referred to page 35 and 36 of the order of the TPO and submitted that the TPO has given valid reasons for holding that the delay in realization of receivables is an international transaction in terms of section 92B of the IT Act and, thereby, making adjustment on account delay in realization of receivables. He accordingly submitted that the grounds raised by the assessee should be dismissed. 15. We have considered the rival arguments made by both the sides and perused the orders of the A.O/TPO/DRP and the paper book filed on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receivables appearing in the accounts of an entity, which may have dealing with foreign AE, would automatically be characterized as an international transaction and decided the issue in favour of the taxpayer by returning following findings :- 10. The Court is unable to agree with the above submissions. The inclusion in the Explanation to Section 92B of the Act of the expression 'receivables' does not mean that de hors the context every item of 'receivables' appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, 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- -vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale and as such no notional interest can be levied by treating the same as unsecured loan. 18. Furthermore it is the case of the taxpayer that when the taxpayer is not charging interest from unrelated third party / non- AE, in case of such delay, no adjustment on interest in case of AE can be made and drew our attention towards the details of invoices raised qua unrelated parties available at page 183A of the paper book wherein delay in realization of the receivables is also up to 218 days for AY 2010-11 and up to 417 days qua AY 2012-13 as per detail of invoices raised on unrelated parties qua AY 2012-13, available at page 236 of the paper book. 19. This issue has been dealt with by Hon'ble Bombay High Court in case cited as CIT-9 vs. M/s. Indo American Jewellery Ltd. in ITA (L) No.1053 of 2012 order dated 08.01.2013 wherein following question was framed :- B. Whether on the facts and in the circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 87,66,641/- being internet receivable on outstanding amount due to the Assessee Company from the Associated Enterprises? 20. Aforesaid question was decided in favour of the taxpayer by upholding th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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