9911796707
TMI Blog2022 (3) TMI 1604X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Act, 1961. 2. Following grounds have been raised by the assessee: 1. That the impugned order of assessment framed by the assessing officer in pursuance of the directions of the Dispute Resolution Panel (hereinafter referred to as DRP ) under Section 143(3) read with Section 144C of the Income-tax Act, 1961 ( Act ), is bad in law, violative of principles of natural justice and void ab- initio. 1.1 That the assessing officer erred on facts and in law in passing order under section 143(3) read with Section 144C of the Act at an income of Rs. 57,96,95,314 as against returned income of Rs. 35,04,84,700. 2. That the assessing officer erred on facts and in law in making an adjustment of Rs. 18,16,82,680 to the arm s length price of the international transactions of provision of software development services undertaken with the associated enterprise on the basis of order passed by the Transfer Pricing Officer ( TPO )/ Dispute Resolution Panel ( DRP ). 2.1 That while giving effect to the direction of DRP, the AO/ TPO erred on facts and in law in computing the operating profit to cost ratio of the appellant at 9.61% as against 15.20% (13.17% in AE segment) computed by the appellant, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or enhancing comparability. 3. That the assessing officer erred on facts and in law in making an adjustment of Rs. 4,75,27,934 to the arm s length price of alleged international transactions of delay in receipt of outstanding receivables, on the basis of order passed by the Transfer Pricing Officer ( TPO )/ Dispute Resolution Panel ( DRP ). 3.1 That the DRP/ TPO erred on facts and in law in recharacterizing the alleged transaction of delay in receipts of receivables as unsecured loans advanced to the associated enterprises. 3.2 That the DRP/ TPO erred on facts and in law in not appreciating that delay in receipt of receivable is not an international transactions, per se, under section 92B of the Act but is a consequence of an international transaction undertaken in the form of services rendered to the associated enterprise. 3.3 That the DRP erred on facts and in law in holding that the non-realization of invoice value beyond the stipulated period (as per contract) is a separate international transaction, whose arm s length price is required to be determined separately. 3.4 Without prejudice, that the DRP/ TPO erred on facts and in law in not accepting that in any case the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 868/Del/2021 for A.Y. 2016-17. For the sake of ready reference, the relevant part of the order is reproduced as under: ITA No. 8726/Del/2019 for A.Y. 2015-16 32. Now coming to the next issue raised in the present appeal against the transfer pricing adjustment made on account of interest due on receivables outstanding. The said issue stands covered in favour of the assessee by the decision of the Tribunal in assessee s own case for Assessment Year 2010-11 in ITA No. 1104/Del/2015 and for Assessment Year 2012-13 in ITA No. 1115/Del/2017 vide order dated 12.12.2017. The Tribunal has relied on the decision of Hon ble Delhi High Court in Pr. CIT-V vs. Kusum Health Care Pvt. Ltd. in ITA No. 765/2016, judgment dated 25.04.2017 and held that no adjustment is to be made on account of notional interest on receivables by relying upon Explanation (i), (a) (c) of section 92B by treating the continued debt balance as an international transaction. Moreover when the taxpayer is debt free company, there is no question of charging any interest on receivables. This issue has also been decided by Hon ble Delhi high Court in case of Pr.CIT-1 vs. M/s. Bechtel India Pvt. ltd. in ITA 379/2016 order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item of 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 characterized 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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. 52. Moreover, the interest can be charged only on loan and borrowing of money and not in case of sale, particularly when there is no penal provision in the agreement entered into between the taxpayer and its AE/non-AE to charge the interest on delayed receivables. Even otherwise, a transaction cannot be re-characterized merely on ground of delay in payment of receivables. 53. Following the order passed by the coordinate Bench of the Tribunal in taxpayer s own case (supra), we are of the considered view that since the taxpayer has not incurred any interest cost nor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
