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TMI Blog2024 (12) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... ence or non-existence do not lie on any continuum. If a company exists for the purpose of some litigation, it exists for the purpose of tax litigation also. This was the dicta of the Hon'ble Apex court in the case of Mahagun Realtors Pvt Ltd. There is no merit in the argument of the learned AR that assessment itself is bad, because the order was passed on the name of M/s Microsemi India Private Ltd. TP Adjustment - transaction of outstanding receivables with the Associated Enterprise of the assessee is in the regular course of their business and cannot be benchmarked as a separate international transaction - In the case of the DCIT vs. McKensey knowledge Centre India Pvt. Ltd [ 2018 (8) TMI 592 - DELHI HIGH COURT] and in the case of Bharti Airtel services Ltd .[ 2020 (10) TMI 294 - ITAT DELHI] it was held that with the introduction of the explanation to section 92B of the Act by Finance Act, it is determinable that if there is any delay in the realization of credit arising from the sale of goods or services rendered in the course of carrying on the business, it is liable to be visited with the transfer pricing adjustment on account of interest income short charged/uncharged. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Panel (learned DRP) in the case of Microchip Technology (India) Private Ltd ( the assessee ) for the assessment year 2018-19, assessee preferred this appeal. 2. Issue in this matter relates to arm s length price (ALP) adjustment in respect of interest on the receivables. Argument of the learned AR is two fold. One is challenging the legality of the assessment order on the ground that in spite of repeated information furnished to the learned Assessing Officer about the merger of Microsemi India Private Ltd. (MIPL) with Microchip Technology (India) Private Limited (MTIPL), the learned Assessing Officer passed the assessment order on a non-existent entity, consequent to its merger. In so far as the merits are concerned, the learned AR s submission is that the assessee has both trade receivables as well as payables and therefore, charging interest only in respect of trade receivables for the purpose of ALP is incorrect. Now, we shall proceed to appreciate these contentions in the light of the material on record. 3. In this matter, notice u/s 143(2) of the Income tax Act, 1961 ( the Act ) was issued on the Microsemi India Private Ltd. (MIPL) on 22/09/2019; that a scheme of amal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions made on either side. In the case of Mahagun Realtors (P) Ltd. supra, the Hon'ble Apex Court held in unequivocal terms that in the case of amalgamation, unlike the winding up of a corporate entity, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues unfolded within the new or the existing transferee entity. Hon'ble Apex Court further held that the business and the adventure lives on but within a new corporate residence, namely, the transferee company. Therefore, it is essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. Hon'ble Apex Court also held that whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case. 7. Viewing in the light of these observations of the Hon'ble Apex Court, the facts of the present case clearly present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the sale of goods or services rendered in the course of carrying on the business, it is liable to be visited with the transfer pricing adjustment on account of interest income short charged/uncharged. Basing on the view taken in a number of decisions of the Tribunal of various Benches, authorities held that it is incumbent upon the taxpayer to separately benchmark the arm s length price of the international transaction relating to interest on overdue receivables from the AE by way of analysis of functions, assets and risks. 10. Learned DR further argued that the credit period as per the invoice with the AE cannot be contemplated as a comparable in TP regime as it is a controlled transaction and lacks arm s length characteristic as held by the ITAT in the case of M/s. Technimont ICB P. Ltd., vs. Addl. CIT 138 ITD 23 (Mum); whereas apart from placing reliance on the view taken by the learned DRP for the assessment year 2018-19 which became final, the learned AR also placed reliance on a decision of the Mumbai Bench of the Tribunal in the case of DCIT vs. Indo American jewellery Ltd in ITA No. 5872/mum/2009 for the principle that if an entity is engaged in commercial transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi Tribunal it was held that with the introduction of the explanation to section 92B of the Act by Finance Act, it is determinable that if there is any delay in the realization of credit arising from the sale of goods or services rendered in the course of carrying on the business, it is liable to be visited with the transfer pricing adjustment on account of interest income short charged/uncharged. It is, therefore, not open for the assessee to agitate this question as to whether the interest on outstanding receivables in an international transaction is requiring separate benchmarking time and again. 14. Next issue remains to be considered is in respect of the rate of interest. While placing reliance on the decisions reported in Tecnimont ICB House Vs. DCIT [2015] 60 taxmann.com 143 (Mumbai - Trib.), Hon'ble Bombay High Court in PCIT Vs. Tecnimont (P) Ltd., (supra) and CIT Vs. Cotton Naturals (I) (P.) Ltd. [2015] 55 taxmann.com 523 (Delhi), learned AR prayed that LIBOR+200 basis points may be adopted. This aspect is no longer res integra and dealt with by the Mumbai Bench of the Tribunal in the case of Tecnimont ICB House (supra) and confirmed by the Hon'ble Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a commonsensical and pragmatic reasoning and held that the interest rate should be the market determined interest rate applicable to the currency concerned in which the loan has to be repaid; that the interest rates should not be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. It is further observed that the interest rates applicable to loans and deposits in the national currency of the borrower or the lender would vary and are dependent upon the fiscal policy of the Central bank, mandate of the Government and several other parameters; that the interest rates payable on currency specific loans/ deposits are significantly universal and globally applicable; that the currency in which the loan is to be re-paid normally determines the rate of return on the money lent, i.e. the rate of interest. While referring to the Klaus Vogel on Double Taxation Conventions (Third Edition) under Article 11 in paragraph 115, the Hon'ble High Court held that the PLR rate, therefore, would not be applicable and should not be applied for determining the interest rate and the PLR rates are not applicable to loans t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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