9911796707
TMI Blog2024 (6) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... letter of borrowing along with the financial position of AE suggest that there is not any financial burden to the assessee against said borrowing. As there is no bearing on profits, income, losses or assets of the assessee as a result of provision of guarantee and the judicial precedents cited by the assessee also support this view, thus the adjustment made on account of corporate guarantee provided to AE is hereby deleted. Addition of interest on the receivables outstanding from these AEs for more than 60 days - applying rate of interest of 5.475% (based on 6 Month LIBOR plus a mark up of 400 basis points), which was confirmed by Dispute Resolution Panel - HELD THAT:- Receivables which are outstanding beyond 60 days have been treated as unsecured loans advanced to AEs and accordingly interest has been imputed thereon. Further TPO has adopted a credit policy of 60 days and the outstanding beyond 60 days have been termed as unsecured loans advanced whereas assessee has been giving a standard credit period of 180 days to AEs as well as third parties. Moreover, assessee is not charging any interest on payables too. The credit policy of the assessee is in line with RBI Guidelines on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of the Assessee by treating outstanding receivables as unsecured loans and charging notional interest thereon. 3. On the facts and circumstances of the case and in law, the Ld.AO grossly erred in emailing the ante dated assessment order along with a cover letter dated 27 May 2022 to the appellant, after the due date of completion of the assessment. The ante dated order emailed on the registered mail of the appellant on 27 May 2022 being time barred is bad in law and is passed with a preconceived mindset of raising frivolous and high pitched demand on the appellant and should be declared null and void. 4. Without prejudice to the above, on the facts and circumstances of the case and in law, the impugned manually signed, ante dated, blurred, non-legible and incomplete assessment order was passed by the Ld.AO without bearing any unique Document Identification Number (DIN) in contravention to the Central Board of Direct Taxed (CBDT) Circular No.19 dated 14-08-2019, leaving the impugned order as invalid and deemed to have never been issued. 5. On the facts and circumstances of the case and in law, at the outset that the aforesaid adjustment made in the impugned assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessee is engaged in manufacturing activities and therefore, purchases and cost of production ought to be included in the cost base. thereby, completely disregarding the facts of the case, the functional profit of the Assessee, established legal principles and internationally accepted transfer pricing guidelines. In doing so, the Ld. TPO, Ld. AO and the Hon'ble DRP also failed to appreciate that Berry ratio is applied only in specific circumstances, i.e. low risk procurement and distributors. 10. On the facts and circumstances of the case and in law, the Ld. TPO, Ld. AO and the Hon'ble DRP erred in violating the provisions of Rule 10B(2) of the Rules by rejecting functionally similar comparable Companies identified by the Assessee in its TP documentation and in arbitrarily identifying a new Comparable company, viz. Azure Joule Private Limited (Azure Joule') without conducting a methodical without considering the differences in the functions performed, assets employed, and risks assumed by Azure Joule vis- -vis the Appellant as required in accordance with Rules 10B and Rule 10C of the rules , thereby restoring to cherry-picking and unsubstantiated selection of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is powers in questioning commercial decisions of the company 15. Without prejudice to the above grounds, the Ld. TPO, Ld. AO and the Hon ble DRP have grossly erred in incorrectly considering bank guarantee rates as Comparable Uncontrollable Price ( CUP ) for the purpose of notionally determining arm s length fee of the Corporate Guarantee. 16. On the facts and circumstances of the case and in law, the Ld. TPO, Ld. AO and the Hon ble DRP have grossly erred in incorrectly comparing risk borne by banks in lending to unrelated parties with parent/subsidiary relationship and subsequently charging a notional mark-up of 200 basis points to cover such notional risk over and above the average commission rate of 2.45% based on information received from various banks. 17. Without prejudice to the above grounds, on the facts and in law , the Ld. TPO, Ld. AO and the Hon ble DRP have grossly erred in clandestinely applying bank rates obtained u/s. 133(6) of the Act for determining the arm s length price of guarantee fee in complete disregard of the fact that the said data is neither available in the public domain nor was shared with the Assessee and hence use of such data for computing the arm s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not charged interest on delayed receivables from third parties as well. 22.3 the Reserve Bank of India ( RBI ) has itself acknowledged the hardships faced by the companies (operating in similar industries) and has revised the foreign remittance guidelines related to credit period norm for jewellery exporters to 180 days. 22.4 not charging any interest on delayed receipts is a generally accepted practice for Gem Jewellery industry. 23. Without prejudice to the grounds above, on facts and in law, the Ld. TPO, Ld.AO and the Hon ble DRP erred in arbitrarily and incorrectly imputing an interest of INR 2,35,21,457/- based on 6 Months LIBOR plus a mark up of 400 basis points. In doing so, the Ld.TPO, Ld.AO and the Hon ble DRP has erred in: 23.1 Adopting an arbitrary and inappropriate mark up of 400 basis points over and above the 6 months LIBOR for calculating the rate of interest. 23.2 not giving benefit of early realization from AEs from computing interest on overdue receivables. 24. On the facts and in the circumstances of the case, Ld.AO erred in levying interest under section 234B and 234C of the Act. 25. That on the facts and circumstances of the case and in law, Ld.AO erred in init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act was passed by the Assessing officer on 28.07.2021 wherein adjustment on account of transfer pricing as proposed by the Transfer Pricing Officer was made and the assessed income was determined at Rs. 80,77,27,100/- after making an addition of Rs. 57,96,99,844/- towards sale, Rs. 95,29,675/- towards corporate guarantee and Rs. 2,35,21,457/- towards interest on receivables. 3. Against the draft assessment order, the assessee filed its objections before the Dispute Resolution Panel and after considering the submissions of the assessee but not accepting the same in entirety, modified the comparable applied by Ld.TPO. The Dispute Resolution Panel vide its order dated 03-02-2022 has confirmed the adjustment so proposed by the Transfer Pricing Officer and thereafter the final assessment order u/s. 143(3) r/w 144C( 13) was passed by the Assessing officer on 24.03.2022 considering the adjustment so confirmed by the Dispute Resolution Panel and making an addition of Rs. 51,61,51,441/-(Rs. 48,31,00,309/- on account of sale, Rs. 95,29,675/- on account of corporate guarantee and Rs. 2,35,21,457/- on account of interest on receivables) to the returned income so filed by the assessee. 4. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis carried out by the assessee in its transfer pricing documentation and has rejected the Cost Plus Method, with gross profit margin/Cost of Production (GP/COP) as the profit level indicator, which is the most appropriate method for the impugned transactions without giving any cogent reasons. It was further submitted that the Transfer Pricing Officer has applied and the Dispute Resolution Panel has upheld the application of Berry ratio with Operating Profit/Value Added Expenses ( OP/VAE) as the PLI under Transactional Net Margin Method ( TNMM) without appreciating that the assessee is engaged in manufacturing activities and, therefore, purchases and cost of production ought to be included in the cost base, thereby completely disregarding the facts of the case, functional profile of the assessee, established legal principles and internationally accepted transfer pricing guidelines. 8. It was further submitted the issue has been decided in favour of assessee in AY 2016-17 by the bench in ITA No. 97/JP/2021 vide order dated 07.02.2022 and the facts being identical except change in figures issue is covered. Assessee has submitted submissions depicting the findings rendered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Total 73,01,60,327 63,96,05,924 C. Capital Work In Progress 0.00 28205679 Total 730160327 667811603 Inventories Particulars Balance as at 31-03-2017 31-03-2016 Materials-in-process 910967578.4 1147178872 Semi Finished Goods 11005174.57 94814854 Finished Goods 33454380.94 61862091 Stores and Consumables 17313784.94 26237152 Total 972740918.9 1330092969 Revenue From Operations Particulars Balance as at 31-03-2017 31-03-2016 Sale of Products: Export Sales 4277440617 Domestic Sales 491836554.5 4769277172 3602334698 Other Operating income 13658064.87 3711679 Total 4782935237 3606046377 Particulars of Sale of Products Particulars Balance as at 31-03-2017 31-03-2016 Gemstones 714268318.1 56251029 Jewellery 3894755401 2864693753 Life Style Products 142897019.9 149867046 Diamonds 17356432.88 25263600 Total 4769277172 3602334698 Cost of Materials Consumed Particulars Balance as at 31-03-2017 31-03-2016 Materials Consumed Opening Material-in-process 1147178872 Add: Purchases 2865656851 4012835724 Less: Closing Materialin-process 910967578.4 3101868145 2271511799 Total 3101868145 2271511799 Particulars of Materials Consumed Particulars Balance as at 31-03-2017 31-03-2016 Gemstones 1993655139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xporter of coloured gemstones and studded fashion jewellery and not a distributor, one wonder how the value of goods so manufactured and exported have no role to play in the profits earned by the assessee. The assessee performs significant manufacturing functions right from procurement of raw material in terms of rough diamonds and gemstones, product conceptualization and designing, processing of rough diamonds and gemstones at its Adarsh Nagar, Sitapura and SEZ Jaipur, SEEPZ Mumbai facilities thereby employing its assets both tangible and intangibles and infrastructure facility and requisite manpower, which are further used for manufacture of studded jewellery and subsequent marketing and sales to its associated enterprises and other independent entities and providing after sales services. We find that it is the associated enterprises which performs the distributorship functions and sells the assessee s products through its retail stores and TV Channels and not the assessee. In the process, the assessee takes all types of risk such as inventory risk, credit collection risk, product risk, manpower risk, market Risk ( to a limited extent), technology risk, general business risk and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a low risk high volume trading business involving back to back trading without any value addition to the goods traded, berry ratio could be appropriate PLI. However, in a situation in which there is further processing of the goods procured before selling the same or in a situation which necessitates employment of assets in infrastructure for processing or maintenance of inventories, the use of berry ratio does not seem to be quite appropriate. We therefore find that in the facts of the present case, the approach adopted by the TPO is bereft of the factual position of the assessee in terms of functions performed, the assets employed and risk undertaken while carrying out its manufacturing and export activities and the approach so adopted is also not in consonance with the approach so suggested by OCED and UN, and the decisions of the Hon ble Delhi High Court and the Coordinate Benches and therefore, the adoption of berry ratio as an appropriate PLI is not justified in the instant case. Issue is Covered by decision of Hon ble ITAT in assessee s own case for AY 2016-17: (b) As elaborated in the tables above, there is no change in nature of activities undertaken during the year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of assessee, no adjustment is warranted. 2. It is being further submitted that the decision of Hon ble Bench in assessee s own case for immediately preceding assessment year in AY 2016-17 in ITA No. 97/JP/2021 vide order dated 07.02.2022 has been challenged by the revenue before Hon ble High Court of Rajasthan, which is pending for disposal without any stay on the operation of decision of Hon ble ITAT. Hence the decision of Hon ble ITAT being operative, the same may kindly be considered. Copy of order of Hon ble Rajasthan High Court farming question of law and current status of the case is placed at Page-1 and 2 of Decision Paper Book. 9. We have heard both the parties and perused material available on record along with decision of bench in assessee s own case for AY 2016-17 in ITA No.97/JP/2021 vide order dated 07.02.2022. It is seen that in the impugned assessment year also the adjustment has been made after applying the berry ratio. Bench has made the categorical findings after analysis of entire fact whether berry ratio is applicable on the assessee or not. In the transfer pricing documentation, the assessee has mentioned the profile of the company and there is no change in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PLI of comparable so selected by the TPO gives a rate of 6.30% whereas the assessee has shown OP/COP of 7.26% thus we find that the in the impugned assessment year also the assessee s transactions with its associated enterprises meets the arms length requirements and no adjustment is warranted. 14. Therefore, in the entirety of facts and circumstances of the case and in light of aforesaid discussions and respectfully following the decision of Bench in the case of assessee in AY 2016-17, the transfer pricing adjustment of Rs. 48,31,00,309/- is hereby directed to be deleted. 15. Ground of Appeal No.13, 14, 15, 16, 17, 18 and 19 are concerned with the adjustment of Rs. 95,29,675/- made on account of corporate guarantee given by assessee for working capital finances availed by the AEs. Briefly the facts of the issue under consideration are that assessee had given corporate guarantee in previous years against the working capital finance availed by the AEs and the same was extended during the year under consideration. Ld.TPO opined that assessee has exposed itself to a big risk by providing corporate guarantee for which the assessee has not charged any amount from the AE and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular cases. It was for this reason that a coordinate bench of this Tribunal, in the case of Channel Guide India Ltd Vs ACIT [(2012) 139 ITD 49 (Mum)], held that even though the assessee had not deducted the applicable tax at source under section 195, the disallowance could not be made under section 40(a)(i) since the taxability was under the provisions which were amended, post the payment having been made by the assessee, with retrospective effect. All this only shows that even when law is specifically stated to have effect from a particular date, its being implemented in a fair and reasonable manner, within the framework of judge made law, may require that date to be tinkered with. When a proviso is introduced with effect from a particular date specified by the legislature, the judicial forums, including this Tribunal, at times read it as being effect from a date much earlier than that too. One such case, for example, is CIT Vs Ansal Landmark Township Pvt Ltd [(2015) 377 ITR 635 (Delhi)] wherein Hon ble Delhi High Court confirmed the action of the Tribunal in holding that the provision, though stated to be effective from 1st April 2013 must be held to be effective from 1st April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, uphold the grievances of the assessee and delete the impugned ALP adjustments. 27. As we have held that no such ALP adjustment is permissible, grievances raised by the Assessing Officer, with respect to quantification of ALP adjustment, are dismissed as infructuous. 28. As we part with the matter, we may add that a substantial question of law on this issue, in the case of Micro Ink Limited the decision followed by us in coming to our aforesaid conclusions, has been admitted by Hon ble jurisdictional High Court and the issue is thus pending for adjudication by Their Lordships. In this view of the factual position, even by deciding this appeal in favour of the assessee, it is nothing more than shifting of judicial forum before which the matter is now to be agitated. We have, therefore, refrained from dealing with elaborate arguments of the parties on merits at this stage. 29. In the result, and subject to the above observations, the appeal of the assessee is allowed. 8. Respectfully following the same, we confirm the findings of the First Appellate Authority. 1.1.4 Bharti Airtel Limited Vs ACIT (2014) 43 taxmann.com 150 (Delhi Trib) 1.1.5 The contention so raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uenced by related parties, the Associated Enterprises benefited and consequently, the income would accrue only to such non-resident and to that extent, shifting of tax base from the country is bound to happen in such transaction and the assessee should have been remunerated appropriately. The Corporate Guarantee was to the tune of Rs. 5574.13 lakhs and Bank Guarantee to the tune of Rs. 40862.34 lakhs. Further, the TPO observed that there is no time period for expiry of the guarantee. Consequently, it will demand more commission charges than the commission charged by the Banks. That apart, the assessee had taken maximum risk in providing Bank Guarantee to their subsidiaries and the entire credit risk is owned by the assessee, the Indian Company and it has to be reimbursed at maximum percentage of fees. Further, the TPO noted as to the manner in which the Bank's charge commission on guarantees extended and observed that the Bank will insist upon cash deposits / guarantee deposits / asset mortgage etc., to extend guarantees on behalf of their clients. Further, it was pointed out that if a situation arises that the Bank Guarantee has to be invoked, when the Associate Enterprise is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Guarantee is not sustainable in law. This conclusion is by observing that the assessee has provided Corporate and Bank Guarantees for the overall interest of its business. It referred to the decision of the Delhi Tribunal in the case of Bharti Airtel Ltd., wherein it is held that Corporate Guarantee does not involve any cost to the assessee and therefore, it is not an international transaction even under the definition of the said term as amended by the Finance Act, 2012. The Tribunal is a final authority to render findings on fact. The Tribunal failed to give any reason as to how the decision in Bharti Airtel Limited would apply to the assessee's case. Furthermore, there was no record placed before the Tribunal by the assessee that they have not incurred any cost for providing Bank Guarantee. As observed earlier, the TPO has compared the nature of documentation executed by the assessee in favour of his Associated Enterprise to come to the factual conclusion that it is a financial service. This finding of fact has not been interfered by the DRP, but the DRP was of the view that the same treatment, which was given in the previous Assessment Year should be extended for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of the explanation by Finance Act 2012. 71. We find from the grounds of appeal filed by the assessee before the Tribunal, no ground was raised as regards the argument that the explanation added by Finance Act 2012, is to be construed as prospective in its application. Furthermore, the Tribunal has also not recorded in its order, more particularly, from Paragraph 92 that the assessee had argued on the issue regarding prospectivity / retrospectivity. Further, the assessee has not challenged the validity of the Explanation nor its applicability with retrospective effect. That apart, even before the DRP, such contention was not raised. The Hon'ble Supreme Court in Gold Coin Health Food Private Limited, while deciding the issue whether an amendment was clarificatory or substantive in nature or whether it will have retrospective effect held as follows: Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 72. A new Enactment or an Amendment meant to explain the earlier Act has to be considered retrospective. The explanation inserted in Section 92B by Finance Act 2012 with retrospective effect from 01.04.2002 commences with the sentence For the removal of doubts, it is hereby clarified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g guarantees. Ultimately, the Tribunal upheld the adjustments made on guarantee commissions both on the guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment of Associate Enterprise. 76. In the light of the above decisions, we hold that the Tribunal committed an error in deleting the additions made against Corporate and Bank Guarantee and restore the order passed by the DRP. Distinguishable facts in the case of assessee: - In this case the assessee company was providing the corporate guarantee for other unrelated concerns as well, therefore, providing the corporate guarantee was sort of service or element of business for the assessee and accordingly it was opined that providing corporate guarantee was one of the financial services provided by the assessee for which it should be appropriately remunerated because while providing corporate guarantee to other unrelated concerns the company was charging guarantee commission from them, whereas, in our case the assessee company is not involved in providing any guarantee for any third party or engaged in the business of providing guarantee. - Providing corporate g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of assessee relying upon the decision of Redington (India) Ltd (supra) and SiroClinpharm (P) Ltd Vs ITO (2021) taxmann.com 73 (Mumbai Trib). 1.2 During the course of hearing it was specifically brought into the notice of Ld.TPO that there is no risk involved on the part of the assessee in providing such corporate guarantee as the loan taken by AE is secured by the assets of the subsidiary. However, the contention so raised was rejected by holding as under: (Page-18 of assessment order) : 1.2.1 A perusal of the findings made above shows that the contention so raised has been termed as flawed on the ground that if subsidiary goes bankrupt, even if the assessee is able to sell the assets of its subsidiary, It may not be able to discharge the full liability. In this regards following facts need the kind consideration: (a) The borrowing availed by the AE was secured by way of First charge on the EPG License of AE. (b) In addition to the above, the loan was secured by way of creating a charge over the inventory of raw material, finished goods and receivables and second charge on all the assets of AE. The relevant extract of sanction letter containing these terms and conditions is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to further secure the interest of lender bank, the AE has issued debenture in favour of bank containing first charge over the inventory of raw material, finished goods and receivable and second ranking charge over its all other assets. 21. Further, a perusal of the financial statements of AE shows that total outstanding balance of said borrowing by AE as on 31.03.2017 was GBP 1.50 Million against which combined value of EPG license, inventory and receivable is more than 9.70 Million. Thus the assets against which the loans were secured were way more than the amount of borrowings and even in case AE goes bankrupt, the assets of AE are enough to repay the borrowing without having any impact on the financial health of the assessee. Moreover, the assessee has not incurred any cost or expenditure for issuing such corporate guarantee. 22. Dispute Resolution Panel while disposing off the objections relied upon the decision of Hon ble Madras High Court in the case of PCIT Vs Redington (India) Ltd which was followed inSiroClinpharm P Ltd Vs ITO. Both the decision were carefully perused along with the facts of the case of assessee. In the case of Redington India Ltd, the assessee company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (based on 6 Month LIBOR plus a mark up of 400 basis points), which was confirmed by Dispute Resolution Panel. 25. During the course of hearing Ld.AR made the following written submissions: 2.1 Receivables are not unsecured loans: Vide SCN dated 24.01.2021 Ld. TPO proposed to treat the amount receivable from AEs as unsecured loans on the ground that payments for the invoices raised have not been received within 60 days and on this premise adjustment have been made. Thus action of Ld.AO has resulted into treating the amount of receivable as unsecured loans and accordingly imputing the interest thereon. It is being most respectfully submitted that said characterization of receivable as unsecured loan' is not in accordance with the provisions of the Indian transfer pricing regulations which provides as under: (a) As per Para 1.121 and 1.123 of OECD Guidelines (updated July 2017), the tax authorities should recognize and appreciate the actual transaction undertaken by a taxpayer and the same should not be disregarded barring exceptional circumstances. The relevant extracts are provided below for your kind consideration: D.2 Recognition of the accurately delineated transaction: 1.121 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan granted, is different from charging interest on bills raised for services rendered. Both are not comparable. Thus, we agree with the submissions of the learned counsel for the assessee and delete these additions both on law as well as on merits (c) In view of these facts and circumstances, it is evident that outstanding receivables from AE were in the course of business and not any lending of money. It is further important to note that Rule 10B(2) of the Income-tax Rules, 1962 ( the Rules ), which lay down the various comparability factors to be considered while undertaking a comparability analysis also inter-alia, include the following: Conditions prevailing in the markets in which the operate, including the geographical location and size of the markets, laws and Government orders in force, costs of labour and capital in market, overall economic development and level of competition and whether the markets are wholesale or retail. In view of the above discussion, the outstanding balances arising from rendering of services to the AE are in the nature of 'trade receivables' and cannot be re-characterized as loans/moneys advanced to AE under any circumstances. 2.2 Contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction. It does not seek to cover any hypothetical transaction which has not taken place between the AEs. The terms and conditions of the intercompany transactions undertaken by Assessee with its AE were concluded on arm s length basis in the TP documentation maintained by the Assessee. The early or late realization of proceeds is incidental to the sale transaction and is not a separate transaction in itself. In other words, these represent the consequence of an international transaction and not an international transaction per-se, as per Section 92B of the Act. Therefore, the same does not warrant the determination of any separate arm's length price ((ALP' ) under Section 92C of the Act. If the ALP in respect of an international transaction is determined, in that case non-receipt of interest in such transaction cannot be treated as a separate international transaction warranting any further adjustment. Once ALP is determined in respect of the primary export transaction, it would be deemed to be covering all the elements and consequences of such transaction. Hence, after having determined the ALP of the primary transaction, it cannot be assumed that separate arm's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 analyzing 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 benefit the AE in some way. So, no adjustment can be made on account of notional interest on receivables by relying upon Explanation (i), (a) and (c) of section 92B by treating the continued debt balance as an international transaction... In view of the discussion and following the consistent decisions of the Tribunal in Assessee's own case for the preceding as well as the succeeding assessment years, no adjustment on account of interest due on receivables from its AE can be made. We further place our reliance on the following case laws: - Gillette Diversified P Ltd in ITA No. 5736/5675/5677(Del) 2015 (Delhi Trib) - Target Sourcing Services In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the decision of ITAT, Delhi Bench in the case of M/s. Kusum Healthcare Pvt. Ltd., (Supra), squarely apply in the case of the assessee since the Assessee earned significantly higher margin than the comparable companies, which have been accented by the TPO, therefore, there was no justification to charge interest on outstanding. 2.3.2 CRM Services India P Ltd in ITA No. 432/Del/2016 (Delhi Trib.) 16. Furthermore when we examine the entity level margin of the taxpayer vis. a vis. comparable companies, the taxpayer has earned higher margin i.e. taxpayer earned 38.39% OP/OC margin vis a vis margin of comparable companies at 11.43% In such circumstances, no separate adjustment on accent of interest can be made. Because the credit period extended to AE cannot be considered as a standalone transaction without considering the main transaction of the sale. This principle was earlier upheld in the case of Kusum Healthcare Pvt Ltd. ws ACIT, Range-5 ITA No. 6814/DeV201 wherein it was held as under: ..17. From the above analysis, it is clear that Assessee had learned significantly higher margins than the comparable companies (which have been accepted by the TPO) which more than compensates for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 days has been termed as loans advanced to AEs. In this regards, the Assessee respectfully submits that in a trade scenario like Assessee, the credit period is typically considered after factoring a variety of aspects such as relationship with the buyer, pricing, discounts, credit worthiness, number of years of relationship. Etc. and accordingly, it would not be feasible to consider a uniform credit period without taking into consideration the specific factors for the particular trade. 2.5.2 In the instant case, the Assessee has granted a credit period of up to 180 days to both AEs as well as third parties. The assessee wishes to emphasize that granting a credit period of 180 days to third parties can itself be considered as an internal benchmark for the realization policy of the Assessee and the same is in line with the RBI Guidelines (also discussed in the decisions of Hon ble Tribunal discussed hereunder) 2.5.3 Assessee further wish to place reliance RBI Master Circular on Export of Goods and Services (Circular No. 14/2014-15 dated 1 July 2014). In the said circular, it is stated that proceeds from export of goods and services must be realized within a period of 9 months from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 60 days is devoid of the facts and circumstances of the case, specifically considering that a statutory government body has itself acknowledged the hardship faced by the companies (operating in similar industry) in realizing the export remittances and has revised the foreign remittance guidelines to 180 days. 2.6 No interest charged from Non AEs as well: 2.6.1 Assessee wish to submit that it has allowed a credit period of 180 days in case of exports made to its AEs as well as to non-AEs i.e, third parties. The same is clearly evident from the invoices raised on AEs as well as non- AEs. Such Invoices raised on AEs as well as Non AEs on sample basis were placed on record before the ld. TPO by way of Annexure 3A and Annexure 3B respectively to submission dated 27.01.2021. 2.6.2 In this regard, it is further submitted that it is the policy of Assessee to not charge any interest from AEs as well as from the unrelated third parties on delayed receipts. It is imperative to note that no interest has been charged by Assessee from third parties even in the cases where realization from third parties s exceeds beyond 180 days. The said practice is in line with the general industry standards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no interest could be charged on delayed payment on commercial consideration for ensuring a long and healthy relationship. it is observed that only in the event of severance of relationship; parties do resort to charging of interest. If the AEs are not recovering interests from third parties for late recoveries, then in the instant case it would be too much to expect the assessee to charge the interest from the AEs. There is no rationale to inflict upon the assessee, merely on presumption that he ought to have charged the interest from its AEs Evonik Degussa India P Ltd Vs ACIT in ITA No.7653/Mum/2011 (Mumbai Trib) Lintas India P Ltd Vs ACIT in ITA No.2024/Mum/2007 (Mumbai Trib) DCIT Mumbai Vs Tech Mahindra Limited in ITA No.1176/Mum/2010 (Mumbai Trib) S Vinod kumar Diamonds P Ltd in ITA No.79/Mum/2015 (Mumbai Trib). 26. Per contra Ld.DR has relied upon the order of Lower authorities. 27. We have heard both the parties and perused the material available on record. The entire issue stem from action of TPO wherein vide Show Cause Notice dated 24.01.2021 the receivables which are outstanding beyond 60 days have been treated as unsecured loans advanced to AEs and accordingly interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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