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of <h1>Tax Appeal Decisions: Compliance Instructions and Key Outcomes for TP, TDS, and Interest</h1> <h3>Avaya India Pvt. Ltd Versus The Addl. C.I.T. Special Range - 1 New Delhi</h3> Avaya India Pvt. Ltd Versus The Addl. C.I.T. Special Range - 1 New Delhi - [2020] 78 ITR (Trib) 305 (ITAT [Del]) Issues Involved:1. TP Adjustment for Notional Interest on Overdue Receivables2. Corporate Tax Adjustment for TDS Reconciliation3. Short Grant of TDS Credit4. Charging of Interest under Section 234B5. TP Adjustment for IT Enabled Services (A.Y 2012-13)6. Disallowance of Car Lease Rentals under Section 40(a)(ia)Issue-wise Detailed Analysis:1. TP Adjustment for Notional Interest on Overdue Receivables:The grievance in Ground No. 3 relates to the TP adjustment in relation to notional interest on overdue receivables amounting to Rs. 4,21,01,399/-. The assessee's counsel stated that an identical issue was decided in favor of the assessee for A.Y. 2010-11. The Tribunal found force in the assessee's contentions, referencing a similar decision in ITA No. 7290/DEL/2018 for A.Y. 2014-15, where it was held that no adjustment on account of interest on outstanding receivables is warranted for a debt-free company. Respectfully following the findings, the Tribunal directed the Assessing Officer to delete the addition.2. Corporate Tax Adjustment for TDS Reconciliation:Ground No. 4 relates to a mismatch between Form 26AS and the tax credit claimed by the assessee, leading to a proposed addition of Rs. 1,07,76,96,802/-. The DRP directed the Assessing Officer to verify transactions with Bharti Hexacom. Despite the DRP's directions, the Assessing Officer made an addition of Rs. 10,79,78,288/-. The Tribunal found the invocation of section 68 on such differences to be bad in law and noted the DRP's categorical finding that only the difference, if any, should be added. The issue was restored to the Assessing Officer/TPO for examination of the reconciliation statement, directing that no addition is called for if the statement is found correct.3. Short Grant of TDS Credit:Ground No. 5 relates to the short grant of TDS credit. The Tribunal directed the Assessing Officer to examine the claim of the assessee as per the furnished evidence and allow TDS credit as per the provisions of law.4. Charging of Interest under Section 234B:Ground No. 6 concerns the charging of interest under Section 234B. The Tribunal stated that charging of interest is consequential and directed the Assessing Officer to charge interest as per the provisions of law.5. TP Adjustment for IT Enabled Services (A.Y 2012-13):The first grievance for A.Y. 2012-13 relates to a TP adjustment of Rs. 2,85,10,070/- to the income of the assessee by holding that its international transactions pertaining to IT enabled services do not satisfy the arm’s length principle. The dispute involved two comparables, Eclerx Services Ltd and Infosys BPO Ltd. The Tribunal found that these comparables were previously excluded in the assessee's own case for A.Y. 2010-11 due to functional dissimilarity and high brand value, respectively. The Tribunal directed the Assessing Officer/TPO to exclude these companies from the final set of comparables.6. Disallowance of Car Lease Rentals under Section 40(a)(ia):The second grievance for A.Y. 2012-13 relates to the disallowance of car lease rentals amounting to Rs. 7,55,58,782/- under Section 40(a)(ia). The assessee's counsel argued that the payees had included the lease rentals in their income tax returns, invoking the second proviso to section 40a(ia). The Tribunal restored the issue to the Assessing Officer/TPO for verification, directing the assessee to furnish necessary evidence and the Assessing Officer/TPO to decide the issue afresh after giving reasonable opportunity of being heard.Conclusion:The appeal for ITA No. 1958/DEL/2017 was partly allowed, and ITA No. 9131/DEL/2019 was allowed. The Tribunal directed the Assessing Officer to follow the stipulated directions for each issue, ensuring compliance with the legal provisions and previous judicial findings.
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