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TMI Blog2024 (12) TMI 1341X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 115JB of the Act is assessed at Rs. 4,66,44,31,180/-. 2. The assessee is a subsidiary of Biocon Ltd. engaged in the development, manufacture and commercialisation of biosimilar. Assessee filed its original Return of Income on 12/2/2021 which was revised on 31st of March 2021 and tax was payable on Book profit tax. 3. This return was picked up for scrutiny and as assessee has entered into international transactions, a reference was made to the DCIT(TP), 1(1)(2) [ld. TPO] to determine the arm's length price (ALP) of various international transactions. The assessee has also entered into several specified domestic transactions. 4. The ld. TPO examined the international transactions. He found that as per Form no 3CEB there are several outstanding receivables from the Associated Enterprises, however assessee did not benchmark them separately but stated there in that these are interlinked transactions. As per form No 3CEB Trade receivable from associated enterprise UK is of Rs. 6,684,881,819/-, trade receivable from AE [ Malaysia] is 100, 24,77,407/- and from USA entity is Rs. 86,728,364/-. 5. The ld. TPO found that aggregation of transaction is possible only when under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receivable. It also rejected the contention of assessee that if there is no policy of charging interest from non-AE and therefore from AE such interest cannot be imputed. With respect to the interest rate of LIBOR + 450 basis points, the ld. DRP confirmed the same for computing interest. The assessee filed certain additional evidence to allow the credit period as per inter-company agreements, whereas the TPO has allowed the standard 30 days as per agreement. The ld. DRP rejected it holding that the credit period of inter-company arrangement is transaction with related party and therefore cannot be considered. 8. Accordingly, the action of the ld. TPO was confirmed. Based on this, the assessment order u/s. 143(3) r.w.s. 144C(13) was passed on 27.6.2024 wherein the total income of assessee is determined at Rs. 14,05,46,884. 9. The assessee is aggrieved with the same and has preferred the following grounds of appeal:- "General Grounds 1. The impugned final assessment order has been passed without following due procedure laid crown in law, and hence, bad in law. 2. The impugned orders passed by the Learned AO/ Learned Transfer Pricing Officer (learned TPO', 'Ld. TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bedded in its service fee, as compared to comparable companies, and the margins of the being at arm's length, the need for a separate adjustment in account of interest on delayed receivables is unwarranted as also unjustified 6.7 Working capital adjustment subsumes the delay in receivables and payables and hence, no separate adjustment on outstanding receivables is required. 6.8 By ignoring the fact that the Appellant has a consistent policy of non-charging of interest on delayed realisation of trade receivables from both third party customers as well as its AEs. 6.9 Erred on facts, by not appreciating that the Appellant does not have a policy of charging interest from other unrelated parties in similar transactions nor has it paid any interest on its outstanding trade payable at year end to unrelated vendors. 6.10 Erred in law and on facts, by not appreciating that the Appellant is not paying any interest on trade payable balances of AEs. 6.11 Erred in fact, by not allowing credit period as per intercompany agreement between the Appellant and its AEs. 6.12 Erred in law and on fact, by computing interest without netting off balance of outstanding receivable from AE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the above-mentioned credits, without appreciating that no adjustment was proposed with regard to the above in the SCN or in draft assessment order or in final assessment order. Hence, in the subject final order, no adjustments can be made. Consequential Grounds 9. The Ld. AO has erred in initiating penalty proceedings u/s 270A of the Act for underreporting of income. 10. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in not granting the interest in accordance with the provisions of section 244A of the Act. 11. The Ld. AO has erred, in law and on facts in levying excess interest u/s 234C of the Act of INR 47,42,435. The Appellant submits that each of above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal." 10. One of the issues raised before us is with respect to the adjustment of Rs. 14,05,46,884 of TP adjustment. The ld. AR submitted that ground nos. 1-4 of the appeal are general in nature. He also did not argue ground no.5. Therefore, ground nos. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that international transaction of outstanding due receivable could not have been separately benchmarked. v. He further referred to the decision of Hon'ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd. v. ACIT, 398 ITR 66 (Del) and referred to para 11 of that order, wherein it is held that where the transaction of outstanding receivables are already factored on pricing and profitability, no further adjustment only on the basis of outstanding receivable can be made as it would distort the picture and re-characterise the transaction. vi. He further referred to the decision of Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications India P. Ltd. v. CIT, 55 taxmann.com 240 and referred to para 100 & 101 stating that net profit margin takes into consideration the outstanding receivables which is inter-linked transaction. He further referred to para 80 of the order to submit that transaction would also mean number of closely linked transactions. vii. He further referred to para 59 of coordinate Bench decision in KGK Enterprises v. ACIT, 88 taxmann.com 264 (Jaipur) wherein such kind of transaction is held to be a closely linked transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction as per serial number 19 of that form. It is submitted that the transactional net margin method is adopted to benchmark this international transaction as these are closely linked to the transaction stated in para number 11B of the form 3CEB. In the transfer pricing study report in paragraph number 4.7 it is stated that though the finance act 2012 has amended the definition of the term 'International transaction' to include capital financing transaction including any type of advance, payments or deferred payment or receivable or any other debt arising during the course of the business. In this regard, receivables from associated enterprises have been considered as closely linked transactions to provision of services under a combined transaction approach and are not being evaluated separately. It was further stated that the rules [ Rule 10 A] also clarified that a 'transaction' includes a number of closely linked transaction. However, there is no reference as to how these transactions are closely linked. Therefore, the learned transfer pricing officer and the learned dispute resolution panel has rejected the argument of the assessee holding that the onus is on the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to that it was stated that presently the value of the goods or software exports made by the exporters is required to be realized fully and repatriated to the country within a period of nine months from the date of exports. In view of the disruption caused by the Covid 19 pandemic, the time period for realization and repatriated of export proceeds for exports made up to or on 31 July 2020 has been extended to 15 months from the date of export. The measure will enable the exporters to realize the receipts, especially from the Covid affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future exports contracts with the buyers. Thus, the financial year for which the relevant relaxation is made by the RBI starts from 1 April 2020. Here in impugned appeal financial year is 1-4-2019 to 31-3-2020. Therefore, for the financial year before us, the above relaxation by Reserve Bank of India does not apply. Therefore, the circular cited of the Reserve Bank Of India does not help the case of the assessee. Thus, we reject reliance on extended time period for this AY is not relevant at all. Even otherwise RBI circular has exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if placed before him. 21. Another argument of the learned authorized representative that instant adjustment was not proposed in show cause notice, no addition could have been made in the draft and final assessment order. We find that the learned transfer pricing officer has given an ample opportunity to the assessee which has been discussed in paragraph number 5 of the transfer pricing order, the reply of the assessee has also been considered, it cannot be said that assessee is not at all been given any opportunity of hearing before the learned lower authorities. The purpose of show cause notice is to make assessee aware about the likely step by the ld. AO and ld. TPO. Thus, assessee has been made aware about the issue in TP Assessment proceedings. 22. With respect to the argument of the learned authorized representative that if the outstanding dues are considered in margin of the assessee in working capital adjustment, it would have also given a better margin to the assessee compared to the comparable margins, the learned authorized representative referred to paragraph number 5.1.4.2, 5.1.4.4.2, 5.2.5.3 and 5.3.2.3 of the transfer pricing study report wherein identical wordings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number 7 is corporate tax Grounds wherein the grievance of the assessee is that while computing the book profit under section 115JB of the act the learned assessing officer has considered the assessed profits and gains from business and profession and treated as its book profit u/s 115 JB of the Act. We have considered this ground of the appeal and find that in the return of income filed by the assessee at schedule MAT the assessee has computed the book profit being under section 115JB of Rs. 4,262,848,182/- tax payable under section 115JB was determined at Rs. 639,427,227/-, whereas in the tax computation sheet, ld. AO computed tax payable at serial number 20 under that section at Rs. 69,96,64,677/-. There is no reference of such difference in the assessment order. It is apparent that the book profit income has been taken by the learned AO at Rs. 4,664,431,180/- against Rs. 4,262,848,182/- shown by the assessee. We do not find any adjustment made to the book profit in the assessment order. Therefore, apparently there is an error which needs to be rectified. Therefore, the learned assessing officer is directed to compute the correct book profit under section 115JB and consequent t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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