TaxTMI Login
AI OCR ✕Convert scanned orders, printed notices, PDFs and images into clean, searchable, editable text within seconds. Starting at 2 Credits/page
Try Now →Just a moment...
AI OCR ✕Convert scanned orders, printed notices, PDFs and images into clean, searchable, editable text within seconds. Starting at 2 Credits/page
Try Now →
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the transfer pricing adjustment made by the Revenue on account of arm's length price in respect of sales to associated enterprises was sustainable. (ii) Whether a separate adjustment could be made for notional interest on outstanding trade debtors from associated enterprises after the sale price had been accepted as arm's length.
Issue (i): Whether the transfer pricing adjustment made by the Revenue on account of arm's length price in respect of sales to associated enterprises was sustainable.
Analysis: The relevant comparison was the operating profit margin on the international transactions for the year under consideration against the margin accepted for the preceding year. The assessee's combined operating profit margin was higher than the margin noticed in the earlier year, and the earlier year's transfer pricing adjustment had already been found unsustainable. The segmental accounts were not maintained, but no material was brought to show that the margin on AE transactions for the year in question was lower than the combined margin. The circumstances therefore did not justify disturbing the first appellate relief.
Conclusion: The addition made on account of arm's length price adjustment was not sustainable and was rightly deleted; the issue is decided in favour of the assessee.
Issue (ii): Whether a separate adjustment could be made for notional interest on outstanding trade debtors from associated enterprises after the sale price had been accepted as arm's length.
Analysis: Section 92 and Section 92B of the Income-tax Act, 1961 contemplate transfer pricing adjustment in relation to international transactions, and in a sale transaction the arm's length price is to be determined for the sale itself. Once the sale price is accepted at arm's length, delayed realisation of sale proceeds does not create a distinct international transaction of interest. The record also showed similar delays in recovery from non-AEs, with no interest charged from them, which negatived any selective adjustment. The CUP framework did not support a further addition on this count.
Conclusion: No separate addition for notional interest on trade debtors was permissible; the issue is decided in favour of the assessee.
Final Conclusion: The Revenue's appeal fails, and the deletions made by the first appellate authority on both transfer pricing issues are sustained.
Ratio Decidendi: Where the price in an international sale transaction has been accepted as arm's length, no separate transfer pricing adjustment can be made for notional interest on delayed realisation of the same sale proceeds, particularly when comparable non-AE delays are also left without interest.
TaxTMI 
TaxTMI 
