Tribunal allows appeal on arm's length price adjustment and provident fund disallowance. The Tribunal allowed the assessee's appeal in a case involving arm's length price adjustment on interest receivables with overseas Associated Enterprises ...
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Tribunal allows appeal on arm's length price adjustment and provident fund disallowance.
The Tribunal allowed the assessee's appeal in a case involving arm's length price adjustment on interest receivables with overseas Associated Enterprises and Section 43B disallowance related to employees' provident fund. The arm's length price adjustment was deleted due to incorrect application of rates, and the disallowance related to provident fund was deleted based on legislative intent clarified in the explanatory memorandum to the Finance Act, 2021. The order was pronounced on 19th May 2021.
Issues: 1. Arm's length price adjustment on interest receivables involving overseas Associated Enterprises. 2. Section 43B disallowance related to employees provident fund.
Analysis: 1. The appeal for AY.2013-14 involves assessing the correctness of arm's length price (ALP) adjustment of Rs. 1,20,78,616 on interest receivables with overseas Associated Enterprises. The Tribunal found that the adjustment was not made based on the LIBOR rate applicable to international transactions but on the State Bank of India's lending rate, which is not appropriate for foreign currency transactions. The TPO's decision to use the short term deposit rate was also deemed incorrect as it does not reflect international market conditions. As a result, the ALP adjustment was directed to be deleted.
2. The second issue pertains to a Section 43B disallowance of Rs. 8,11,648 concerning employees' provident fund. The lower authorities argued that the fund had to be deposited before the due date prescribed by the statute, not the due date for filing the return under Section 139(1). The Revenue relied on Section 36(va) with an explanation, but the Tribunal disagreed, citing the explanatory memorandum to the Finance Act, 2021. The memorandum clarified that the impugned default before 01-04-2021 was condoned by the legislature. Consequently, the disallowance was deleted based on this legislative intent, and the necessary computation adjustments were directed to be made.
In conclusion, the Tribunal allowed the assessee's appeal, pronouncing the order on 19th May 2021.
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