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TMI Blog2023 (1) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing 90 days credit period and interest rate at LIBOR rate plus 300 basis points on delayed realization beyond 90 days, is accepted. The TPO will accordingly compute the ALP on the lines indicated above after affording assessee opportunity of being heard. The appeal of the assessee is thus allowed in part. - Shri N. V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Assessee : Shri. Narendra Kumar Jain, Advocate. For the Revenue : Shri. Sreenivas T Bidari, CIT(DR)(ITAT), Bengaluru. ORDER PER N. V. VASUDEVAN, VICE PRESIDENT : This is an appeal by the assessee against the final order of assessment dated 16.07.2022, passed by the ACIT, Circle-7(1)(1), Bengaluru, under section 143(3) read with Section 144C(13) of the Income Tax Act, 1961 (Act) in relation to Assessment Year 2018-19. 2. The assessee is a company engaged in the business of providing Information Technology Enabled Services (ITeS) to its Associate Enterprise (AE). The transaction of rendering ITeS to an AE was an international transaction and therefore income arising from such transaction has to be determined having regard to Arm s Length Price (ALP) as per the provisions of Sec.92 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period is not an international transaction. It was contended that the transaction of extended payment terms given to AE s does not have a bearing on profits, incomes, losses or assets of the enterprise hence is not an international transaction. (c) All the international transactions are benchmarked by considering the assessee as the tested party and the margin of the assessee is within arm s length range of comparable. Therefore, the international transactions are at arm's length. Since receivable is not a separate transaction from sale or provision of service. It emanates from sale or service transaction. The international transaction is that of `sale , the ALP is determined qua the `sale price . While determining the ALP in a sale transaction, all the relevant aspects including the credit period allowed are taken into view. Once ALP in respect of the provision of service transaction is determined, it would deem cover all the elements and consequences of the transaction of provision of service. Once it is held that sale or service transaction is at arm s length , separate addition for receivables is not required to be made. (d) Without prejudice to the above, it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was quite distinct. Addition on account of the excess share premium was made which, in the opinion of the TPO, should have been received by that assessee from the issuance of shares. It is on this excess share premium short received, that the amount of interest was also charged. The base amount on which interest was calculated by the TPO in the case of Vodafone India (supra) was itself a capital receipt not chargeable to tax and not a trading debt arising during the course of business, which issue has been discussed in the immediately succeeding paras. Instantly, we are concerned with the late realization by the assessee of trading debt from its AE which is otherwise a revenue receipt and has also been offered for taxation. 13.5. At this juncture, it is apposite to note that the Finance Act, 2012 has inserted Explanation to section 92B with retrospective effect from 1.4.2002. Clause (i) of this Explanation, which is otherwise also for removal of doubts, gives meaning to the expression 'international transaction' in an inclusive manner. Sub-clause (c) of clause (i) of this Explanation, which is relevant for our purpose, provides as under:- Explanation.--For the removal of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the order of ITAT in the case of Xchanging Solutions Ltd., Vs. DCIT IT(TP)A No. 2570/Bang/2019, order dated 16.08.2022, he would not press for any other relief. In the order cited by the learned Counsel for assessee, the ITAT, Bengaluru Bench held as follows: 8. From the records we note that the Ld. TPO records that, realisation of receivables from non-AE was within 112 days, whereas there is a delay of 11 days in realising the receivables from the AE on which the Ld. TPO has computed interest. In our opinion, such imputation of interest is arbitrary and is not in accordance with the principles laid down by the various decisions of Coordinate Bench of this Tribunal on this issue as well as various High Courts. 9. It is also noted that the Ld. TPO has not considered whether the said receivables are subsumed in the computation of the Working Capital Adjustment. In fact, we note that, the Ld. TPO has not granted any Working Capital Adjustment to the assessee, which in our view is again not in accordance with the transfer pricing principles for computing arms length of the international transaction. It is noted that, the assessee has filed before the Ld. TPO the Working Cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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