Transfer pricing on delayed receivables upheld; Form 26AS mismatch needs verification, while section 14A disallowance stays out of book profit.

Delayed receivables from associated enterprises were treated as an international transaction for transfer pricing purposes, and the notional interest adjustment was upheld because the assessee had itself furnished the working and sought a lower interest rate. The Form 26AS tax credit mismatch required factual verification to ensure the same income was not taxed twice, so the matter was accepted for verification. A disallowance under section 14A read with Rule 8D could not be added back while computing book profit under section 115JB, and the MAT adjustment was deleted.

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Issues: (i) Whether notional interest on delayed realisation of receivables from associated enterprises was liable to transfer pricing adjustment and whether such receivables constituted an international transaction; (ii) Whether the addition made on account of mismatch of tax credit reflected in Form 26AS required verification to avoid double addition; (iii) Whether disallowance under section 14A read with Rule 8D could be included while computing book profit under section 115JB.

Issue (i): Whether notional interest on delayed realisation of receivables from associated enterprises was liable to transfer pricing adjustment and whether such receivables constituted an international transaction.

Analysis: The adjustment was sustained on the basis that the assessee itself had furnished the working and had sought adoption of a lower interest rate during assessment. The Tribunal also relied on the view that interest on delayed realisation of receivables is itself an international transaction for transfer pricing purposes.

Conclusion: The adjustment on account of receivables was upheld and the assessee's challenge failed.

Issue (ii): Whether the addition made on account of mismatch of tax credit reflected in Form 26AS required verification to avoid double addition.

Analysis: The Tribunal found that the issue called for factual verification at the assessment stage to ensure that the same income was not brought to tax again in another assessment year. The matter was therefore not finally determined on merits but sent for verification as a statistical acceptance.

Conclusion: The ground was accepted for statistical purposes and required verification by the Assessing Officer.

Issue (iii): Whether disallowance under section 14A read with Rule 8D could be included while computing book profit under section 115JB.

Analysis: Relying on the Special Bench view that section 14A disallowance does not enter the computation of book profit under section 115JB, the Tribunal held that the impugned MAT addition was unsustainable.

Conclusion: The addition under section 115JB was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded only in part: the transfer pricing adjustment on receivables was sustained, the Form 26AS-related issue was remitted for verification, and the section 14A-based MAT adjustment was deleted.

Ratio Decidendi: Delayed receivables from associated enterprises can constitute an international transaction for transfer pricing purposes, while a section 14A disallowance cannot be mechanically imported into book profit computation under section 115JB.

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