ITAT directs re-examination of interest receivable from AEs beyond 180 days, considering uniform policy.

The ITAT allowed the appeal of the assessee regarding the addition of interest receivable from Associate Enterprises (AEs) beyond 180 days. The ITAT directed the Assessing Officer to re-examine the issue considering the assessee's uniform policy of not charging or paying interest on overdue export payments and delayed import payments. The AO was instructed to apply the same criteria for credit periods in both receivable and payable transactions with AEs, allowing for netting off of interest payable and receivable, and making adjustments accordingly. The matter was remanded to the AO for further examination based on the modified directions.

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Issues:
Confirmation of addition of interest receivable by the assessee from its Associate Enterprises (AEs) calculated at the rate of 18% on the credit period beyond 180 days.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the addition of interest receivable from AEs beyond 180 days. The Assessing Officer observed that the assessee had transactions with AEs and granted credit period beyond 180 days. The assessee argued that no interest was charged on overdue export payments and no interest was paid on delayed import payments. The AO, however, made an adjustment for interest on credit granted beyond 180 days. The CIT(A) dismissed the appeal, leading the assessee to appeal to the ITAT.

The ITAT referred to a previous order in the assessee's case for A.Y. 2008-09 where a similar issue was considered. The Tribunal in the previous order noted that if the assessee had to make import payments to a party, delayed export realization should not be considered as bearing interest. The Tribunal directed the AO to re-examine the issue and consider if the assessee already had obligations to pay its AEs for imports. The ITAT agreed with the assessee's argument that a uniform policy of not charging or paying interest should be considered in the assessment.

The ITAT modified the directions given in the previous order and instructed the AO to examine the matter as a whole. The AO was directed to apply the same criteria for credit periods in both receivable and payable transactions with AEs. The netting off of interest payable and receivable should be done, and adjustments made accordingly. The appeal of the assessee was treated as allowed for statistical purposes, and the matter was remanded to the AO for further examination and adjudication based on the modified directions.

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