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TMI Blog2025 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... erm is never the part of agreement of provision of sales or services, further there is no link between the overdue outstanding receivable and the extended credit period allowed to the AE, therefore it is not linked with those transactions. Hence, it is a separate international transaction and therefore it should be benchmarked separately. To that extent, we do not find any infirmity in the order of the ld. TPO. >TPO has computed the interest of trade receivable by applying the SBI PLR of 13.27% - We do not find any invoice raised by the assessee on its AEs in Indian currency. The computation of rate of interest @ 13.27% adopted by the ld. TPO and confirmed by the ld. DRP is devoid of any merit. As per the order of the TPO himself, if the invoices are raised in foreign currency, the interest rate should be charged on the basis of prevailing LIBOR rate + appropriate mark-up. Therefore, as the ld. TPO has not charged interest adopting LIBOR rate, we direct the ld. TPO to apply the LIBOR rate as the basis for computation of interest. >Mark-up over and above - Generally, risk involved in this type of overdue receivable is minimal. Thus, it is for the assessee to show nature of ris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise (AEs) as loan extended to the AE and thereby erred in computing notional interest on the outstanding balance from the AE amounting to INR 17,777,133, While doing so, the learned AO/ TPO erred by not appreciating the fact that the outstanding receivables from AE were purely on account of genuine business reasons and was not undertaken with any mala-fide intention to extend any indirect credit period benefit to AEs. >3. The learned AO/ TPO erred in law and facts by rejecting the contention of Appellant that the receivables have resulted out of international transactions undertaken by the Appellant with its AE and is subsumed within the arm's length price determination of the principal transactions itself using the transactional net margin method ("TNMM") es the most appropriate method in the 1'P study report. The learned AO/ TPO has also erred in law and facts by treating outstanding receivables as a separate international transaction as per provisions of section 92B of the Act. >4. The learned AO/ TPO erred in law and facts by not granting working capital adjustment which was sought for and contended by the Appellant before the learned TPO. >5. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITes] with respect to travel request, travel bookings and claims of expenses. The assessee filed its return of income on 1.1.2021 at a total income of Rs.36,12,59,340 which was picked up for scrutiny and one of the reasons for scrutiny was examination of TP aspect of international transactions based on TP risk parameters. >3. The functions performed by the assessee is related to limited localisation of promotional initiatives such as exhibition events and participation in trade shows. The assessee provides marketing and sales support services to its AEs. The function of assessee includes identifying potential customers, distribute and disseminate information of the product, gathering client and business specific data and act as facilitator between the AEs and existing customers. It acts as a first point of contact between the customers and AEs. It also advises AE on the market trend, strategies, market conditions, information of the competitor and new products. It is also responding to enquiries of the customers regarding technology and the product. >4. The TPO found that there is delay in receivable from the AEs over and above the agreed period and therefore it amounts to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracterised the outstanding receivable as of 31.3.2020 as loan transaction and has applied the interest at SBI PLR @ 13.27% and did not provide any basis of determination of arm's length interest. >10. The ld. AR further referred to paperbook (PB) No.2 filed before us showing the invoice copies and ageing schedule. He further referred to several judicial precedents. Further, his main contention was that the if the outstanding receivable is considered as a separate international transaction of financing to AEs, then adoption of rate of 13.27% adopting SBI PLR rate by the ld. TPO is grossly unjust. He submits that invoices are prepared in Foreign Currency, therefore there cannot be applicability of SBI PLR. >11. The ld. DR vehemently submitted that overdue interest receivable beyond the agreed time period is a separate international transaction which cannot be subsumed in the normal transaction of sale because the amount is not collected by the AE during the agreed time period. It was submitted that it is a transaction of financing to AEs. Therefore, it should be benchmarked separately. The ld. AO/TPO has adopted rate of 13.27% correctly. >12. We have carefully considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed by the ld. DRP is devoid of any merit. As per the order of the ld. TPO himself, if the invoices are raised in foreign currency, the interest rate should be charged on the basis of prevailing LIBOR rate + appropriate mark-up. Therefore, as the ld. TPO has not charged interest adopting LIBOR rate, we direct the ld. TPO to apply the LIBOR rate as the basis for computation of interest. >14. So far as the issue of mark-up over and above is concerned, it is to be based on the basis of risks involved. The Markup is to be based on actual delineation of the financial transaction of overdue receivables, which is different from tenure loans and other financial transactions. Generally, risk involved in this type of overdue receivable is minimal. Thus, it is for the assessee to show nature of risks involved. Thus, Assessee is directed to show that what mark-up should be charged on LIBOR rate for benchmarking the above transaction with various risk factors involved. The ld. TPO may verify the same and then after examination, apply the LIBOR after verification of invoices and determine the mark-up on the basis of various risk factors. In view of the above facts, ground nos. 2 to 8 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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